Mark Cuban’s new drug company, Cost Plus Drugs, exposes how the U.S. government spends billions of unnecessary dollars each year on Medicare.
Medicare is one of the most expensive programs in the federal government. The program is characterized by wasteful spending. The program had a budget of $644 billion in fiscal year 2019, accounting for about 14% of the total federal budget, of which the program uses more than $137 billion for prescription drugs.
In 2019, healthcare advocates pushed to create an “international pricing index” to bring drug prices in line with what other nations pay. Pharmaceutical companies fiercely oppose that legislation. American drug prices are among the highest in the world, with other countries paying a fraction of the price because they pay a small premium above manufacturing costs. Pharmaceutical companies have a practice of selling drugs to developing nations at reduced wholesale prices, something they do not do in the United States.
Cuban’s newest venture sells over 100 generic prescription medications at the cost of production, plus a 15% margin and $8 pharmacy dispensing and shipping fee. His business structure reflects how most pharmaceutical companies interact with the rest of the world, offering a similar pricing structure to ease access to much-needed care.
Medicare could have saved as much as $3.6 billion per year if it purchased generic medications from Cost Plus Drugs, according to new research from Brigham and Women’s Hospital and Harvard Medical School.
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Researchers compared the price charged by Cost Plus Drugs for 89 generic medications to the cost for the same drugs paid by Medicare in 2020.
The research revealed that the government program could have saved 37% on 77 generic drugs by buying from Cuban’s company.
Cost Plus Drugs launched in January and utilizes a direct-to-consumer system that bypasses wholesalers, pharmacies, and insurers. These intermediaries frequently drive up the cost of medicine. As a result, the company offers generic drugs at prices lower than what Medicare and major insurers pay.
Cubans company is not the only avenue that has proven that Medicare could save billions in funding. Wholesale retail chain Costco offers discount pricing to its members. According to other research, Costco’s pricing could save Medicare about 13-20% annually in its spending on prescription drugs.
Medicare consistently loses about $40 billion annually in overspending and improper management within the government program.