The United States has a shameful problem with exorbitant prescription drug pricing. Insulin, for example, a life-sustaining drug as necessary as oxygen for millions of people with diabetes, costs more than ten times as much in the U.S. as it does in 32 other countries, according to a 2018 report from the U.S. Department of Health Human Services. But the cost of insulin is a grain of sand on a miles-long beach. Prescription drugs in the U.S. commonly cost many times more than in other countries.
California rep Katie Porter famously lambasted former Celgene CEO Mark Alles during a House Oversight Committee’s investigation of Celgene’s massive and indefensible price hike of Revlimid, a drug used in cancer treatments. Revlimid’s price had increased from $215 in 2005 to $763, for a single pill. Porter got Alles to admit that the company — that he, Mark Alles, CEO — was essentially price-gouging Revlimid so they could hit annual earnings targets and collect their half-million dollar bonuses. In 2017, Alles’s salary was $13 million. While cancer patients were going broke trying to get their life-prolonging medicine.
Pharmaceutical companies’ go-to line for defending their drugs’ exorbitant prices is that the revenue earned funds new research and development. That’s been proven many times over to be utter bullshit, but they keep trying to get us to believe it.
Mark Cuban is trying to offer Americans an alternative. The billionaire entrepreneur best known for his role as an investor on the reality show “Shark Tank” and for his ownership of the Dallas Mavericks is in the process of launching a new generic drug company called Mark Cuban Cost Plus Drug Company. The goal of the company is to offer low-cost versions of generic drugs with full transparency in how they price those drugs.
From the company website: “We will let everyone know what it costs to manufacture, distribute, and market our drugs to pharmacies. We add a flat 15% margin to get our wholesale prices. This makes sure we remain viable and profitable. There are no hidden costs, no middlemen, no rebates only available to insurance companies. Everybody gets the same low price for every drug we make.”
Many people ration their necessary prescription drugs in an effort to stretch their dollar further. Our healthcare system in general is an embarrassing mess. Cuban is hoping to allay some uncertainty, at least in terms of the cost of medication, by providing 100 generic drugs via the Mark Cuban Cost Plus Drug Company by the end of 2021.
The first drug to be offered will be albendazole, an oral antiparasitic medication that treats hookworm and other parasitic infections. It’s on the World Health Organization’s list of essential medications and yet costs an average of $225 per tablet but as much as $400 per tablet. The Mark Cuban Cost Plus Drug Company intends to offer albendazole for $20 per tablet. The “full transparency” pricing looks like this: Cuban’s company produces albendazole for $13 per tablet. They add a 15% profit margin and charge $15 per tablet wholesale to drug sellers. They set the manufacturer’s suggested retail price at $20 per tablet. And if you have insurance, you may pay less than a dollar per tablet. Cuban is also looking to build his own pharmaceutical manufacturing facility in Dallas by 2022.
The 15% profit margin seems obvious here. No one should be getting private-island rich from “helping” sick people. Life and health are priceless — not in the sense that most of us would be willing to sacrifice literally everything we have to save a loved one’s life, but in the sense that health and life shouldn’t have price tags at all. It should be self-evident that a healthy society is obligated to ethically care for its citizens.
The scientists who develop the drugs that treat and cure people do well financially, but it’s the CEOs of the drug companies that get filthy stinking rich. The CEOs often aren’t scientists at all. As of 2017, of the CEOs leading the top 50 biopharma companies, 35 of them had no advanced scientific or medical degree. 18 had no graduate degree at all, and 18 of them simply had an MBA. Kenneth Frazier, the CEO of Merck, one of the top five pharmaceutical companies in the world, earned $27.65 million in 2019. He has a law degree from Harvard.
These people are not saving anyone’s life; they are simply enriching their own. They’re lining the pockets of their thousand-dollar suits with money they got from what almost amounts to extortion: Pay the price, or die.
My concern with Mark Cuban’s lovely idea of producing generic drugs with full-transparency pricing is that he won’t be able to address the many drugs that can’t be produced or are extremely difficult to produce in generic form. Patents are meant to allow drug companies to recoup research and development costs, but as we’ve seen, drug companies and their massively overpaid CEOs rake in millions. Far, far beyond “recouping.”
I love that Mark Cuban is trying to do something good that will be a smart investment for him without sticking it to the consumer. But it’s going to take more than one man’s good ideas to fix our broken system; we need a total overhaul. The citizens of the “richest country in the world” shouldn’t be going broke because they were unfortunate enough to get sick.
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