Potential Medicare Part D Savings on Generic Drugs From the Mark Cuban Cost Plus Drug Company

Abstract

Background: In January 2022, the Mark Cuban Cost Plus Drug Company (MCCPDC) launched an online pharmacy selling more than 100 generic prescription drugs at the cost of ingredients and manufacturing plus 15% margin, $3 pharmacy dispensing fee, and $5 shipping fee. In some cases, these prices are lower than those paid by insurers, including Medicare. Objective: To estimate the potential savings if Medicare Part D plans paid MCCPDC prices. Methods: For 109 generic medications sold by MCCPDC on 8 February 2022, we identified the price, including the pharmacy dispensing fee and shipping fee, for the minimum (for example, 30 count) and maximum (for example, 90 count) quantities available (1). We identified 2020 Medicare Part D spending for 89 (82%) drugs, excluding 20 drugs with multiple dosage forms (for example, cream and ointment) because average weighted Medicare unit prices by ingredient were not comparable to MCCPDC unit prices (2). When multiple dosage strengths were available from MCCPDC (68 of 89 drugs), we conservatively selected the most expensive option (1). We estimated potential Medicare savings as the difference in unit price between MCCPDC and Medicare, multiplied by the number of units dispensed to Medicare enrollees in 2020. Because ingredient costs changed between 2020 and February 2022, we adjusted Medicare prices and spending by the percentage change in each drug's National Average Drug Acquisition Cost from 1 July 2020 to 9 February 2022. As a result, all prices are reported in 2022 U.S. dollars, but annual use was from 2020 (the most recent Medicare data available) (2). Findings: Estimated annual Medicare spending on these 89 drugs was $9.6 billion. If Medicare purchased generic drugs in the maximum quantity supplied by MCCPDC, it could have saved $3.6 billion (37%) on 77 of 89 (87%) generic drugs. Of the $6 billion in total estimated Medicare spending, MCCPDC prices did not offer savings for 12 drugs ($1.5 billion). Of the $4.5 billion in drug spending where savings were available, costs were $1.9 billion (43%) for ingredients and manufacturing, $1.4 billion (30%) for shipping, $820 million (18%) for pharmacy fees, and $402 million (9%) for the 15% margin (Figure). The drug with the highest potential savings was esomeprazole ($293 million) (Table). If Medicare had purchased drugs in the minimum quantity available from MCCPDC, it could have saved $1.7 billion (18%) on 42 of 89 (47%) drugs. In this scenario, shipping ($872 million, 39%) and pharmacy fees ($523 million, 24%) made up a higher percentage of total spending (Figure). Discussion: In this cross-sectional study, Medicare could have conservatively saved up to $3.6 billion in 2020 by purchasing 77 generic drugs at MCCPDC prices. Our findings suggest that Medicare is overpaying for many generic drugs, which is consistent with findings that Medicare overspent on 43% of generic prescriptions in 2018 relative to Costco member prices (3). Our study was limited to the generic drugs sold by MCCPDC, which represent 25% of the approximately $38 billion in Medicare Part D generic drug spending in 2020 (4). The number of generic drugs sold by MCCPDC has increased since our analysis. We did not account for out-of-pocket costs for Medicare enrollees. There could have been additional savings from the small number of brandname drugs dispensed despite the availability of interchangeable generic drugs.