Rae Woods (00:02):
From Advisory Board, we are bringing you a Radio Advisory. My name is Rachel Woods. You can call me Rae. Look, it is no secret that drug pricing in America is a enormously complex problem. Entrepreneurs like Mark Cuban, believe that they can be part of the solution. That's where he's invested in Cost Plus Drugs, a new online pharmacy selling generic drugs directly to consumers, and he's doing it at prices much lower than typical retail prices. The question is, is this actually a meaningful solution or is it just a bandaid? Can the federal government step in and adequately fill those gaps? And what does this mean for the rest of healthcare? To answer those questions, I've brought two Advisory Board pharmacy experts, Gina Lohr, and Chloe Bakst. Hey, Gina. Hey, Chloe. Welcome to Radio Advisory.

Gina Lohr (01:03):
Thanks, Rae.

Chloe Bakst (01:05):
Good to be here.

Rae Woods (01:06):
I want to start with a question that's a little bit fun. I swear there's a point which might reveal itself immediately, but let's start with you, Chloe. Do you watch reality television?

Chloe Bakst (01:17):
Yes. I certainly do. Huge Bachelorette fan here.

Rae Woods (01:21):
Gina, do you watch reality TV? Are you a fan of the trashy television?

Gina Lohr (01:24):
I have gotten into it on occasion, but not on the regular. But if I start watching a season, then it's all gone.

Rae Woods (01:32):
Then you're locked in.

Gina Lohr (01:32):
Yeah.

Rae Woods (01:48):
I can't believe I'm about to say this, but part of the reason why we're coming together is to talk about an entrepreneur who is related to reality TV. Who the heck is Mark Cuban, and why should health leaders know that name?

Gina Lohr (02:04):
I mean, you say Mark Cuban and I think rich business guy. I think he made his money in tech entrepreneurship back in the '90s. And then now I think everybody knows him from Shark Tank, right? Or maybe basketball fans, Mavericks.

Rae Woods (02:19):
Exactly. I mean, I did not watch Shark Tank because I only re-watch television. I watch nothing new anymore, because I'm a sucker for nostalgia. But once I started looking into it, I realized the Shark Tank connection. But why do healthcare leaders need to know who this entrepreneur is, this guy that we saw on Shark Tank?

Chloe Bakst (02:40):
So Mark Cuban has sort of jumped into the healthcare space, putting his name on an online pharmacy, Mark Cuban's Cost Plus Drug company. And really, it seems like he's trying to figure out a way to get generic drugs to consumers at a lower price with full transparency.

Rae Woods (03:01):
And look, the world of drugs and pharmaceuticals is actually super complicated in healthcare. So how is this company, this online store different from the traditional way that drugs are priced and distributed and actually get in the hands of real people.

Gina Lohr (03:16):
A big part of it is that you know where your money is going for the most part, or at least supposedly know where your money is going, if you buy a prescription drug from Mark Cuban's pharmacy, because you go onto the website and it will tell you $8 and 30 some cents is going to purchase the drug from the manufacturer. $3 is going to a pharmacy dispensing fee. 15% of that $8 is going to profit, is markup, margin for the pharmacy. And then you need to pay shipping on top of that. So you know exactly where your money is going, and he can do that because the pharmacy doesn't accept insurance.

Rae Woods (03:56):
Mark Cuban is following a trend that we've been talking about a lot on this podcast, which is non-healthcare entities getting into healthcare. I just said this, the world of drugs is particularly challenging and bureaucratic and complex. I guess my question is, why drugs? What is the problem that Mark Cuban is hoping to solve that he believes his company can actually get out ahead of?

Chloe Bakst (04:22):
I think that Mark Cuban is trying to solve a couple of problems here. The first is that he's really trying to cut out the middleman, the PBM, the pharmacy benefit manager, who's primary job is to negotiate drug prices with manufacturers on behalf of health plans so that they can get to patients. Along that supply chain when the drug makes its way to the patient, I think this is the second part of the issue that Mark Cuban's trying to get at, is the fact that the cost that the patient pays at the pharmacy counter might not reflect necessarily the price that the PBM is negotiating with the manufacturers. So by cutting out that PBM, Mark Cuban's able to potentially provide lower cost drugs to the consumer without sort of the complexity that the PBM brings to the table.

Rae Woods (05:16):
My question is of all of the things that an outsider could get into in healthcare, why drugs? What is the problem that Mark Cuban is hoping to solve?

Chloe Bakst (05:27):
Why drugs? Right off the bat, maybe a cynical answer is because there's a lot of money in drugs and you can sort of come off as the good guy and offer lower prices and still make, like Gina mentioned, a 15% markup on every transaction. What I think is maybe the more moral answer is that it is very complex. There are a lot of players, middlemen, pharmacy benefit managers, other stakeholders who add that complexity. And what Mark Cuban's trying to do is simplify it as that external disruptor coming in, offering these lower prices in a very transparent way and hoping to get more patients access to their medications.

Rae Woods (06:13):
And there's the very clear consumer angle of drug prices are through the roof and consumers, patients, purchasers want lower prices for their pharmaceuticals. How exactly is Mark Cuban's Cost Plus Drugs able to actually act as a middleman and make a profit while also offering such lower prices for people?

Gina Lohr (06:39):
So I think it's really important to flag that he is only doing this for generic drugs right now. So it's one type of transaction that he's focusing on. And with generic drugs, I mean, you have so many different players in the supply chain, getting the drug from the manufacturer to the patient, who's taking the drug at the end of the day. You have the distributor in there, you have the pharmacy benefit manager, and you have the pharmacy who are all playing a role in sort of marking up the price a little bit. And so by being the pharmacy and going directly to the manufacturer and promising a level of scale, he is cutting out any PBM markups and any distributor markups on those prices, and then promising transparency to take that price straight to the patient.

Rae Woods (07:30):
I don't want to be the cynic here, but I guess what's the catch? I mean, one you just mentioned Gina, which is, we're just talking about generics. So it's not even all generics. But this sounds very much like a white knight who's coming in, but that can't be true.

Gina Lohr (07:48):
I mean, I think if you're a patient who takes one or a handful of drugs and they're all generics and you can just switch your pharmacy wholesale to Mark Cuban's pharmacy, it might be a great deal for you, but I think there are some downstream implications, both at the patient level and societally that it's important that we talk through. I mean, if you're a patient that anything you spend on your drugs through Mark Cuban's pharmacy isn't going to be building toward your deductible for the year. And so if you're a patient who is counting on that spend to get you to the deductible faster so that you're paying less later on, you're not going to get that benefit.

Chloe Bakst (08:28):
Also, adding to Gina's point where you need as a patient often your most savings are not on those generic drugs. You need savings on those brand name drugs, those specialty drugs. That's where your copays are going to be the highest. So although there is a benefit to getting lower-cost generics... And I'm not saying that you can't spend a lot of money on generics, you certainly can, especially a lot of prescriptions, but that's not where the biggest pain points lie.

Rae Woods (08:54):
What you're getting at is the reality of just how complex the system is. And even as good as Cost Plus Drugs intends to be while also making money, right, we are talking about an entrepreneur here, it's not a perfect solution. So let's spend a little bit more time talking about some of these ripple effects. Maybe there are unintended consequences. Fragmentation is a big one that you just mentioned, Gina. What are some other consequences that the industry is just going to have to grapple with even as lower cost drugs through this online marketplace is a benefit for at least some people?

Gina Lohr (09:30):
Something else that I'm paying attention to or thinking about with Mark Cuban, as well as other digital disruptors that sort of take national scale to lower prices for patients, is sort of a question of what's the impact on retail pharmacies, community-based pharmacies. Is this going to take just enough more volume from them that they're not able to keep their doors open anymore? We hear a lot of talk about retail pharmacies struggling. I think they're also trying a lot of strategies to stay afloat. So it's unclear what will be the straw that breaks the camels back, but it's certainly worth thinking about what's the role of that local pharmacies in this.

Chloe Bakst (10:14):
So Gina just mentioned fragmentation, and I think an important part of that fragmentation is the fact that many patients, I think the average patient on Medicare has about 50 prescriptions. We already discussed, you can't get all of those prescriptions filled most likely at Mark Cuban's drug company. So you're going to have to necessarily split your medications across different pharmacies, and that can really impact medication management, pharmacist insight into any potential side effects that could conflict or be additive. And you lose that element of care that a pharmacist can bring to the table when they actually have the insight into and across all of a patient's prescriptions.

Rae Woods (10:58):
Which reminder, if our listeners missed the conversation that we had with Walgreens a couple of weeks ago, we were reminded that the patient-pharmacist relationship is actually incredibly strong and can be deeply loyal, on par with, if not greater than, the relationship with somebody like your primary care physician. So that's not something to discount.

(11:22):
Look, none of those ripple effects are small. So I guess my question is, do you recommend that real people use this service, or is this a flash in the pan that's making good headlines and getting a lot of retweets on Twitter, but maybe isn't ready for the market?

Gina Lohr (11:40):
I think Mark Cuban's pharmacy is filling a huge need for some patients. Certainly, there are people in my life that I care about, who I have recommended they go and look up their prescriptions and look to purchase them through Mark Cuban's pharmacy because purchasing the copay cost for their generic drugs is high, might be a barrier to them being adherent to those drugs. And comparing their copay through a variety of health plans to their costs through Mark Cuban's pharmacy, especially if they were to get a 90-day fill, it's lower. They're going to save a lot of money, and maybe that will make the difference between them being able to take these life-saving medications or not.

Rae Woods (13:28):
We've been talking a lot about Mark Cuban in part, because it's been something that's taking up a lot of air time in our headlines, but there's another thing happening in the world of drugs that's also been in the media, and that is of course the federal government's efforts to reduce and control drug pricing. I am, of course, talking about the Inflation Reduction Act. Chloe, where did that legislation ultimately land?

Chloe Bakst (13:57):
All right. The Inflation Reduction Act, I think when it was originally a bill, it was much more broad sweeping than what we've ended up with as the law, but I do think it's still pretty significant. We have Medicare negotiation now on the table for those really high-cost specialty drugs. That's going to keep growing year by year. More drugs will be eligible for that negotiation. There's the inflation tax for manufacturers who, if they raise their drug prices a certain amount above inflation, they'll get taxed by the government, as a sort of disincentive to do so. And there's some benefits for Medicare enrollees, such as insulin price cap and general spending cap as well.

Rae Woods (14:45):
So on the one hand, we've got Mark Cuban's company that is offering lower-priced generic drugs, not getting into the specialty drug game yet, although I think that's a goal, but focusing on the generic side. Then you've got the Inflation Reduction Act that's pulling a couple of different levers to try to reduce and, in some cases, cap the cost of some of the most expensive specialty drugs. Does that mean we solved the problem? I mean, do the combination of these two things get us out of this enormously complex drug pricing problem?

Gina Lohr (15:15):
Wouldn't that be nice?

Rae Woods (15:16):
Wouldn't it be nice?

Gina Lohr (15:18):
I mean, I think part of why drug pricing is so complicated is because there's so many different types of drugs, categories of drugs. So Mark Cuban is addressing generics. The IRA is addressing some of the most costly drugs, I think 10 a year, but there's still plenty of drugs out there. I think you need a lot more pieces to fully get at all of the facets of the drug price problem.

Rae Woods (15:47):
I guess, as researchers then, what are you going to be watching for next? You've got two key players that doesn't even begin to scratch the surface and how many folks are focused on the complex problem of drug costs and drug pricing. What are you going to be watching for to see how the industry reacts to this new legislation and reacts to this new disruptor?

Gina Lohr (16:11):
With the legislation, I think there's a lot of speculation about how it will change manufacturers' strategies. They're really the entity that was most impacted. Do they now raise the prices that they launch new drugs at because they're not going to be able to raise those prices as much on a year-over-year basis because of the inflation price caps? Do they have different strategies with their biosimilar launches because of the impact that the negotiation will have on some of those high-cost biologics? I think there's a lot of questions, more questions than answers about the interplay of the Inflation Reduction Act, drug provisions on drug costs themselves. And on Mark Cuban's side, I mean, I'm just so curious how the industry responds. I think watching to see if he spurs entities toward transparency with the transparency he brings, watching to see if other pharmacies launch with a similar model or look to beat him at his own game in a way. Are PBMs going to latch onto transparency there?

Chloe Bakst (17:28):
I'm also curious to see what Mark Cuban's going to do in the future. I know his long game is to launch his own PBM and start manufacturing his own drugs and sort of become a one-stop shop for prescription drugs, access for the public. And if and when that happens, that'd be a huge disruptor and would have, I'm sure, giant impacts for commercial health and Medicare.

Rae Woods (17:55):
Those are all really big picture areas to watch. Now, I want to narrow things down, and I want to think back to some of those ripple effects and unintended consequences that you mentioned. Fragmentation, confusion for patients who aren't seeing one pharmacist or one provider for all of their care, right? The reality that it's not necessarily going to help patients with their total out-of-pocket costs, all the things that you've mentioned. What are some kind of smaller, more specific steps that you want the industry to take right now to avoid or reduce some of those ripple effects?

Gina Lohr (18:30):
If there's ever a time for primary care providers, even specialists, to think about collaborating more closely with pharmacists in their practice, it feels like as the pharmacy landscape gets more complicated, that's a huge value added skill set, even a pharmacy technician, perhaps, who can sit down with patients and help them think through their pharmacy options, the costs, what is the pathway to being able to afford their medications and have a coherent sort of medication strategy. As it gets more complicated for patients, they're going to need help to stay adherent to their drugs and actually get the prescriptions filled as the doctors are prescribing them.

Chloe Bakst (19:13):
I also think it's important for providers to consider whether or not they're going to recommend patients go to what pharmacies. Are you going to recommend that your patients go to Cost Plus? Are you going to recommend that they go to the local CVS? And be knowledgeable and prepared to support them with either choice, but really take into account social determinants of health, as well as that medication management piece that Gina asked and be thoughtful in deciding if it's more important that this patient maybe have a slightly higher copay for a drug, but they have that better pharmacy-managed care, or is it better, are they going to be more adherent, if they get a lower cost medication and that's going to ultimately improve their outcomes? And I think that's a really difficult question for providers to grapple with, but it's going to only become more and more relevant as we see Mark Cuban-like companies keep popping up.

Gina Lohr (20:08):
Mark Cuban is not the only one who's doing this. I've seen so many articles lately of local pharmacists who are establishing a second pharmacy right next to their first one. They've got their generics-only pharmacy where they offer a very similar deal to what Mark Cuban is offering. And then they have their traditional pharmacy where they're filling prescriptions using insurance. He's not the only game in town.

Rae Woods (20:32):
He's just making the most waves because people know who Mark Cuban is. Or maybe I should have known before this conversation. Maybe I should add more reality TV to my watch list.

(20:45):
Well, Gina, Chloe, thank you for coming on Radio Advisory.

Gina Lohr (20:49):
Thanks, Rae.

Chloe Bakst (20:50):
Thanks for having us.

Rae Woods (20:56):
Look, I wish that I could tell you that one or both of these solutions would solve America's drug pricing problem, but as Chloe and Gina talked about, this issue is just all too complex. That doesn't mean that we should sit back. It is going to take action from people like you to help move the needle on drug pricing. So remember, as always, we're here to help.