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Investigators suggest that policies that improve price transparency and increase competition for generic drugs could prevent patients and Medicare from overpaying on generic drugs.
If Medicare had purchased generic drugs supplied by Mark Cuban Cost Plus Drug Company, it could have saved $3.3 billion (36%) on 77 of 89 (87%) generic drugs, finds a new analysis published in the Annals of Internal Medicine.
Mark Cuban Cost Plus Drug Company is an online pharmacy (www.costplusdrugs.com) that launched in January 2022 offering more than 100 generic drugs. The pharmacy’s prices reflect actual manufacturer prices plus a flat 15% margin and pharmacist fee. It is using Truepill’s digital health platform, which launched in 2016. Mark Cuban’s online pharmacy is a cash pay website and doesn’t accept insurance but the company said it can offer many products for less than most insurance plans' deductible and copay requirements would total. Currently, the company offers 200 of the most commonly prescribed generic medications. We do not carry brand or specialty drugs at this time.
“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,” investigators wrote.
Investigators, led by Hussain Lalani, M.D., M.P.H., looked at 109 generic medications sold by the Mark Cuban Cost Plus Drug Company as of Feb. 8, 2022. Lalani is with the Program On Regulation, Therapeutics, And Law (PORTAL), division of pharmacoepidemiology and pharmacoeconomics, Department of Medicine at Brigham and Women's Hospital.
They identified the price, including the pharmacy dispensing fee and shipping fee, for the minimum (30 count) and maximum (90 count) quantities available. They identified 2020 Medicare Part D spending for 89 drugs, excluding 20 drugs with multiple dosage where pricing with Mark Cuban Cost Plus Drug Company was not compatible. Prices were also adjusted to reflect increases in ingredient costs.
Investigators found that annual Medicare spending on these 89 drugs was $9.3 billion. If Medicare purchased these generic drugs in the maximum quantity supplied by Cost Plus Drug Company, it could have saved $3.3 billion (36%) on 77 of 89 (87%) generic drugs. Of the $6 billion in total estimated Medicare spending, the only pharmacy prices did not offer savings for 12 drugs ($1.5 billion).
The drug with the highest potential savings ($241 million) was rosuvastatin, which is used to treat patients with high cholesterol. Savings for esomeprazole prescriptions would have $235 million, and potential savings from aripiprazole would be $233 million. Esomeprazole is a proton pump inhibitor to treat patients with gastroesophageal reflux disease. The antipsychotic aripiprazole is used to treat patients with schizophrenia, bipolar disorder, and depression.
If Medicare had purchased these drugs in the minimum quantity available from MCCPDC, it could have saved $1.5 billion (16%) on 41 of 89 (46%) drugs. In this analysis, shipping ($789 million, 38%) and pharmacy fees ($474 million, 23%) made up a higher percentage of total spending.
“Generic drug competition is a major source of prescription drug savings in the United States, but the lower prices from a direct-to-consumer model highlight inefficiencies in the existing generic pharmaceutical distribution and reimbursement system,” investigators wrote.
Investigators pointed out, however, that the study was limited to the generic drugs sold by Mark Cuban Cost Plus Drug Company, which represent 25% of about $38 billion in Medicare Part D generic drug spending in 2020. Investigators also did not assess out-of-pocket costs for Medicare enrollees.