February 14th, 2022

Mark Cuban’s Cost Plus Pharmacy Unpackaged

There has been a lot of buzz recently around the new Mark Cuban Cost Plus Pharmacy. Similar excitement occured last year when Amazon announced the integration and rebranding of PillPack into the Amazon Prime experience as Amazon Pharmacy. The excitement around these known disruptors jumping into the pharmacy ecosystem demonstrates how hungry America’s employers and patients are for pharmacy innovation. 

For many incumbent PBMs, these new entrants pose a threat because they may disrupt hidden revenue streams extracted from traditional pharmacies. At SmithRx, our view is different.  As a true Drug Acquisition Platform, we welcome the innovation. We have no incentives or conflicts of interest in the pharmacy supply chain, and we welcome these new pharmacy solutions into our platform to help navigate members down the lowest cost path. Our mission is to cut through the noise and identify the best cost savings solutions for our clients and members, and we’re happy to work with any and all pharmacies to achieve that mission. 

With that said, let’s take a deeper look at Cost Plus Pharmacy.  The business has two main value propositions: 

  1. Removing middlemen margins by circumventing the typical manufacturer, wholesaler, pharmacy supply chain.
  2. Bringing transparency to pharmacy pricing by disclosing acquisition cost, margin, and fees.

These are great principles on which to build a pharmacy business, and as a 100% pass-through PBM we support this effort at bringing transparency to pharmacy pricing.  There is no question that there are outsized margins being taken by middlemen in the supply chain. In theory, by removing some of these players the pharmacy can maintain profitability while lowering costs to the end user. 

The Cost Plus Pharmacy has disclosed their pricing model to be acquisition cost + 15% margin + shipping fees. The question for Smith as a DAP always hunting for the lowest cost drugs for our members then becomes: can this model be competitive knowing many pharmacies operate on margins lower than 15%?  We did an analysis comparing Cost Plus Pharmacy’s disclosed pricing on its currently available medications to the pass-through pricing members can receive from our current pharmacy partners. Although there were some medications that are less expensive at Cost Plus Pharmacy, on average the pricing was similar or even higher in cases. 

Analysis Summary

  • 74 of 109 drugs were more expensive at Cost Plus than at pharmacies currently in the SmithRx network
  • Of the 35 drugs that were less expensive at Cost Plus Pharmacy, 20 of them had cost differences less than $20
  • 92 of 109 medications evaluated had a cost difference of less than $20 between Cost Plus Pharmacy and other pharmacies in the SmithRx network

These results indicate that Cost Plus Pharmacy has not yet accomplished their first objective of eliminating expensive elements in the supply chain. As they work to do so, they will hopefully start to earn a cost advantage over their competitors. It was recently disclosed that their first step in this process is becoming a compounding pharmacy and repacking medications that are in short supply and have high markups.

We also look forward to Cost Plus Pharmacy being more accessible to insured patients. At present the Cost Plus Pharmacy is a cash-only pharmacy. This means members would have to pay out of pocket for their medications and submit a receipt to the PBM for reimbursement. This provides a cumbersome barrier for insured individuals to utilize the pharmacy.

At SmithRx, we see an enormous opportunity to work with the Cost Plus Pharmacy and others like them given our aligned transparent business model. By incorporating these partners into the drug acquisition platform SmithRx can direct members based on the medications they are taking to the best pharmacy solution. The end result is savings for not only members but also the plan sponsors.  

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Partnering with SmithRx to provide transparent pharmacy benefits helps us deliver low-cost, high-quality care. Their pass-through model is the best way to ensure prescription drug pricing is fair.

Will Young
CEO at Sana Benefits

My loudest and most challenging group was handled perfectly in the first 30 days post-go-live by SmithRx. If it were up to me, I would put every one of my new groups with SmithRx.

Ken Mensio
Vice President at Risk Strategies

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