- The federal government spends more than $115 billion a year on prescription drugs through Medicare.
- The program spent $9.6 billion in 2020 on 89 generic drugs now available at Mark Cuban’s low-cost pharmacy.
- If the government were to switch, researchers estimate it would save taxpayers at least $3.6 billion.
If the U.S. government were to use billionaire investor Mark Cuban’s low-cost pharmacy to buy generics for Medicare, the savings would be staggering.
According to a new study published this week in the Annals of Internal Medicine, it would have saved at least $3.6 billion if the service existed in 2020 and if the government had purchased 89 of the prescription drugs available on the site.
That’s more than a third of the $9.6 billion spent on that first set of drugs in 2020, and the list of drugs has already tripled since CostPlusDrugs.com went live earlier this year.
Cuban told Insider he wasn’t surprised by the study’s findings, given that Medicare prices are public information.
For an industry that only seems to grow in complexity every year, the Cost Plus concept is astonishingly simple: a 15% markup, a $3 issuance fee, and a $5 shipping fee (or $15 for expedited service).
The service also doesn’t accept insurance, which poses a bit of a problem for Medicare since federal law prohibits the government from purchasing drugs directly for Part D participants.
“It’s clear that Medicare is overpaying for some generic drugs and they could save billions,” lead study author Dr. Hussain Lalani at The Wall Street Journal. “There are some serious inefficiencies in the pharmaceutical supply chain.”
dr. Lalani is a family physician at Brigham and Women’s Hospital and a fellow of Harvard Medical School, while two of his co-authors disclosed financial support from Arnold Ventures, a philanthropic organization focused on fighting high drug prices.
The highest overall savings found in the study was $293 million on an acid reflux drug called esomeprazole, which is available under Medicare for $160 per 90 tablets, but costs just $17 for the same amount on the Cuban site. Even Costco members pay 43% less than Medicare for generic prescriptions, a previous study found.
The second-highest total savings was $241 million from the cholesterol treatment rosuvastatin, which costs half on the Cuban site when Medicare pays through Part D.
Cuban told Insider that the company wanted to find the drugs that had the biggest impact, and that the initial offer came down to what his team could convince manufacturers and distributors to sell.
Americans spend about $365 billion on prescription drugs each year, and Medicare is responsible for nearly a third of that, or $115.6 billion. Within Medicare, generic drugs represent approximately $23 billion.
Industry analysis found that 64 cents of every dollar spent on generics is absorbed by the supply chain that moves drugs from manufacturers to patients, with half of that profit taken by pharmacies like CVS and Walgreens.