Billionaire Mark Cuban Wants To Lower Drug Prices With Generics Startup

^Billionaire Mark Cuban is mad about the high cost of prescription drugs in the United States, and he’s taking matters into his own hands. While Cuban is best known as an investor on the reality television show Shark Tank and owner of the Dallas Mavericks, you may soon see his name on pill bottles at local hospitals and pharmacies. The Mark Cuban Cost Plus Drugs Company, which launched out of stealth this week, aims to sell 100 different generic drugs at transparent prices by the end of year. 

“It's ridiculous what the pricing for generic drugs is. Period end of story,” Cuban, who Forbes estimates to be worth $4.2 billion, wrote in an email. He did not disclose how much he invested in the eponymous company. “I put my name on it because I wanted to show that capitalism can be compassionate and to send the message I am all in.” 

The idea for the Dallas, Texas-based company grew out of one of the most notorious pricing scandals of the last decade: when so-called “Pharma Bro” Martin Shrkeli raised the price of Daraprim 5,000%—from $13.50 to $750 per tablet—while he was CEO of Turing Pharmaceuticals. The drug is used to treat a severe parasitic infection. “I was just so livid about that,” says Mark Cuban Cost Plus Drug Company founder and CEO Alex Oshmyansky, who is also a practicing physician. “I had patients have serious injuries from the high cost of drugs, which should have been very cheap. I've been angry about it for a long time.”

That’s also one of the reasons why the company’s first drug will be a generic version of another antiparasitic drug called albendazole, which treats hookworm. The worm travels through the feces of an infected person and was largely eradicated from the United States with widespread use of modern sewage systems. However, as the price of the treatment gets farther out of reach, hookworm has made a comeback, particularly in the rural South. 

“The people getting price-gouged are people who are living in extreme poverty,” says Oshmyansky, adding that it only takes two tablets of the drug to treat an infection. “If you get it, and you treat it right away, it's not a big deal. But if it's left to fester, it can cause cognitive defects and neurological problems.” The Mark Cuban Cost Plus Drug Company announced a partnership with Rojelio Mejia, an assistant professor and physician at Baylor College of Medicine, to study the prevalence of hookworm in rural Alabama. 

The average cash price for albendazole is $225 per table, and the company will sell it for $20 per tablet. The business plan is supply chain transparency: buying drugs from wholesalers, packaging them, adding a 15% markup and selling to pharmacies, clinics and health systems. The goal, according to the website, is to produce “low-cost versions of high-cost generic drugs.” The company is also building a Dallas facility to fill and package medication under sterile conditions, which it hopes will be up and running by April 2022.

The more we can bring transparency to the market, the more we can help normal market dynamics take place.

^There is no simple or easy explanation for why generic drugs, which can cost pennies to manufacture, wind up costing people tens or maybe even hundreds of dollars, depending on insurance status, at the point of sale. Congress investigated the middlemen of  this byzantine system, known as pharmacy benefits managers, which negotiate with manufacturers and pharmacies on behalf of insurance companies, in 2019. Sen. Ron Wyden, a Democrat from Oregon labeled the negotiations "the most gnarled, confounding riddles,” adding “what PBMs do to earn all those profits is a mystery.”

“I hold two doctorates, including a degree in applied mathematics and theoretical physics. It took me years to try to figure out how all this actually works,” says Oshmyansky. It’s a system of artificially inflated price lists, multiple players who all add markups along the way and secret rebates and discounts that are intentionally “constructed to obfuscate,” he says. Companies like GoodRx, which went public in September, have also tried to circumvent the system by helping patients compare prices and offering coupons that are often below the cash price of a drug. 

Oshmyansky has experience as an entrepreneur. While in graduate school, he cofounded a company which makes door handles that dispense waterless hand sanitizer now called OpenClean Technologies. He then went to medical school and practiced as a diagnostic radiologist (he still sees patients once a week). Around five years ago, he started working on a non-profit pharmaceutical company. In summer 2018, he was selected for the startup accelerator Y Combinator, where he shifted gears towards a for-profit public benefit corporation that would be a compounding pharmacy. The idea was that making high-cost generics one at a time for individual patients would still end up being cheaper than the list price. 

A few months later, he reached out to Cuban the way that many entrepreneurs do: a cold email. And the current iteration of the company took off from there. Cuban has several healthcare companies in his investment portfolio, ranging from digital prenatal care startup Mahmee to Unite Genomics, which uses data to pair rare disease patients with clinical trials and accelerate research. “From his public persona, I primarily thought of Mark as a sports, media personality. But he is deeply, deeply knowledgeable about the pharmaceutical industry and pharma pricing,” says Oshmyansky. “He's been directly involved in shaping the strategic direction of the company.”

The next year will be about execution and staffing up to deliver on the promise of 100 lower cost generics by the end of the year. The healthcare industry has always been unique in that “you can't ask the prices before you buy something,” says Oshmyansky. He hopes to change that: “The more we can bring transparency to the market, the more we can help normal market dynamics take place.”