For the first time, Mark Cuban’s Cost Plus Drug Company is selling medicines made by a large drug manufacturer directly to consumers at a greatly reduced price, the latest sign that the billionaire is trying to make good on his vow to disrupt the opaque pharmaceutical supply chain.
Until now, the company has focused on selling generic versions of brand-name medicines. But the upstart recently announced that it is selling the Invokana and Invokamet diabetes drugs from Janssen, a unit at Johnson & Johnson. A month’s supply will cost patients $243.90, a significant cut from the lowest price on GoodRx’s website, which is $582.89. The average retail price is $676.14.
Since Cuban first began openly discussing his plans for upending the pharmaceutical supply chain, he has spoken in broad terms about making medicines available to consumers and employers at lower cost. So the deal with Janssen is seen as significant, because the Cuban company has now persuaded a brand-name drug maker to supply medicines.
“Any disruption that can lower list prices is a good one. What Mark Cuban and his team have done is true disruption, and is terrific for patients,’’ said Walid Gellad, who is director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh. “For this particular drug, I think conceptually it’s significant in that this is a branded drug whose list price will be lower and transparent.’’
The pricing is most likely to appeal to people who lack insurance or have high deductible health plans, because their costs are often tied to higher wholesale prices. “The number of people who will benefit here is not certain,’’ Gellad added.
Broadly speaking, many people stand to benefit from this approach, according to Alex Oshmyansky, who heads the Cuban company. He estimated that as many as 100 million people are uninsured or underinsured across the country. Based on the number of people who take the Janssen drugs or the same type of medicines, he estimated 1 million people could benefit from a lower price.
“In general, the value proposition we try to give to branded companies is access to a large number of people,’’ he said. “So we allow the brand-name companies to dip their toe in the water… And this is a way for drug companies to stand out from their competition and attract a substantial patient population.’’
In a 2020 report, the J&J unit claimed that, during the previous four years, the wholesale price for Invokana was $519. But a $313 rebate was offered to health plans for favorable placement on formularies, the list of covered medicines. So a health plan paid a net price of $206, yet health plans base patient cost sharing on wholesale prices. So even when net prices fall, patients may not directly benefit.
In industry parlance, this pricing differential is called the gross-to-net bubble, which Cuban is effectively popping.
A J&J spokesperson wrote to say the arrangement with the Cuban company is “another example of how we are supporting patient access to needed medicines especially for cash-paying patients who are uninsured, or who are underinsured because of cost-shifting by commercial payers. We have long-standing, strong relationships with all stakeholders across the health care system, including with pharmacy benefit managers (which create formularies), that are integral to our efforts to help us maintain market access for our products.’’
The deal is the latest bid by Cuban to streamline the purchasing process for Americans, who have long complained about the high cost of medicines. The online pharmacy, started last year, boasts that it negotiates directly with manufacturers and breaks out related costs — including shipping fees and its own 15 percent mark-up — on its website. It does not accept insurance.
The effort was launched even as federal and state officials attempted to address the problem of high drug prices. Some state lawmakers have explored importing medicines from Canada, where prices are lower. In California, state officials are hoping to make low-cost insulin with help from CivicaRx, a nonprofit formed by philanthropies and hospital systems largely to address drug shortages.
A new federal law called the Inflation Reduction Act will allow Medicare to negotiate prices for certain medicines starting in 2026. Another key feature caps insulin costs at $35 a month for beneficiaries. Insulin makers also recently reacted by lowering list prices on some insulins for others.
Yet it has taken years for such moves to take hold. Meanwhile, a recent analysis found that Medicare could have saved billions of dollars if the federal agency had purchased generic drugs directly from Cuban. Consequently, pharmaceutical pricing experts believe the pace at which Cuban is moving can start to have a real impact.
“When Invokana launched in 2013, its price was around $260 per month. Today, it can be bought at pharmacies for more than $600 per month… Considering all the inflation since 2013, the fact that he’s now offering Invokana for $244, less than its original launch price, is pretty incredible,’’ said Antonio Ciaccia, who heads 3 Axis Advisors, a consulting firm that tracks drug prices.
“This gross-to-net bubble popping is significant and demonstrates a new path of disruption for Cuban beyond what he’s been able to accomplish with generics,’’ he continued. “To me, it’s another important example of how disconnected list prices can be from reality. The value provided by Cuban in this announcement is, unfortunately, somewhat of an anomaly in the current system. (This is) a true, transparent low price without the normal fluff and disparate pricing schemes that enable arbitrage, waste, and inequity.’’
Whether still other brand-name drugmakers will follow suit remains to be seen.
To some extent, the deal may reflect circumstances specific to this particular drug. Besides the declining net price, a key patent on Invokana expires in July 2024, suggesting lower-cost generic versions of the medicine may soon become available. This may be incentive for Janssen to supply the Cuban company now because the deal could boost sales of an older medicine.
And prescriptions have, in fact, been declining in recent years. In 2020, prescriptions totaled 1.93 million for Invokana and Invokamet, as well as an extended release version of Invokamet. That fell to 917,000 last year, according to IQVIA, a market research firm.
The Cuban company, meanwhile, has started expanding into the market for employers. It plans to offer discounts directly to a company that was created by a coalition of 40 large private and public employers, which seeks to cut out the usual middlemen in the system known as pharmacy benefit managers.