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Cost Plus Drugs Partnerships: Cutting Drug Costs for Health Systems
Jared Dashevsky, MD
December 08, 2024 • Estimated Reading Time: 9 minutes
GRAND ROUNDS
Cost Plus Drugs Partnerships: Cutting Drug Costs for Health Systems
Mark Cuban’s Cost Plus Drugs Company just announced a new partnership with Penn Medicine—their third health system partnership in under a year.
If you’ve been a Huddler for a while, you know I’m a big fan of Cost Plus Drugs. Back in February 2024, I broke down their business model and why it’s shaking up the drug pricing game.
With this latest partnership making headlines, it’s the perfect time to dive back into Cost Plus Drugs.
In this article, I’ll walk you through their growing list of health system partnerships, break down their other strategic partnerships, and make a case for why CMS should be next on their list.
Cost Plus Drugs’ Health Systems Partnerships
In 2024 alone, three health systems have partnered with Cost Plus Drugs to purchase highly used generic medications in bulk directly. The primary goal of these partnerships is to save health systems money on generic drugs that are in short supply—not save patients money.
Now, you may be thinking, wait a minute… I thought Cost Plus Drugs was a direct-to-consumer pharmacy.
Yes, they are direct-to-consumer. And they still save patients money through their consumer model. But Cost Plus Drugs is also business-to-business.
Back in February 2024 (literally two weeks after I did a whole analysis on the company), Cost Plus Drugs launched a new generic drug marketplace powered by GraphiteRx for healthcare companies, including pharmacies, hospitals, surgery centers, and providers. The company offers over 4,000 medications, including drugs in critical shortage, through this marketplace. Going through Cost Plus Drugs allows bulk purchases at a transparent, fixed mark-up price, which is cheaper than what is standard now.
Since the marketplace’s launch, healthcare entities have partnered with Cost Plus Drugs through the platform, including health systems.
Below is a timeline and details of partnerships with health systems:
December 2024, Penn Medicine (16 retail pharmacies): will directly purchase the top 100 most frequently dispensed generic drugs from Cost Plus Drugs for their 16 retail pharmacies. These drugs span from antibiotics to anti-cancer medications. With the savings reaped from this partnership, Penn will “reinvest [them] in care innovations that are giving patients new choices and setting new standards for medicine.”
May 2024, ScionHealth (94 hospital campuses): will directly purchase drugs in bulk of certain medications to be delivered to Safecor Health's SafecorLogics program, which ScionHealth uses to centralize their own unit-dose supply chains.
March 2024, Community Health Systems (71 affiliated hospitals): was the first national health system to partner with Cost Plus Drugs. Initially, the partnership was limited to CHS-affiliated hospitals in PA and TX, as well as medications like epinephrine and norepinephrine. Then, in June 2024, CHS expanded this partnership to include all of its affiliated hospitals and 12 additional medications, with expectations of saving several hundred thousand dollars.
Other Noteworthy Partnerships
As I mentioned in my last article on Cost Plus Drugs, the company has formed strategic partnerships with other key players, including pharmacies, PBMs, and payers/employers.
Pharmacies
Cost Plus Drugs has partnered with hundreds of independent pharmacies nationwide that accept a “Team Cuban Card” discount card to help patients purchase their medications at lower prices. The card addresses the preference of individuals who favor local pharmacies and have established relationships there rather than opting for mail-order services. On the flip side, these partnerships also give power back to independent pharmacies to help them compete against large incumbent retail pharmacies.
Recently, Cost Plus Drugs partnered with eNavvi to integrate Team Cuban Card pricing, enabling physicians to prescribe discounted medications and offer patients transparent, affordable options at over 7,000 pharmacies.
PBMs
Cost Plus Drugs partnered with several PBMs rather than creating an in-house PBM, aligning with their commitment to avoid rebates and cost spreading—two traditional practices that drive up drug prices. These partnerships integrate seamlessly into Cost Plus Drugs’ supply chain, offering a more efficient and transparent approach.
Here are the partnered PBMs:
Rightway Healthcare: A care navigator and PBM with no rebates or cost spreading, allowing members direct access to Cost Plus Drugs via their app.
AffirmedRx (formerly EmsanaRx): Provides a supplemental drug discount pipeline with a flat 1.5% service fee, capping insurance claim fees at $3 while passing along any collected rebates.
RxPreferred Benefits: A transparent PBM offering employer-sponsored access to low-cost generic meds covered by insurance through Cost Plus Drugs.
PCA Rx: Focuses on transparency with a pass-thru pricing model, ensuring affordable access to high-quality medications in collaboration with Cost Plus Drugs.
Payers
Cost Plus Drugs has also partnered with Capital Blue Cross and Sidecar Health to provide beneficiaries with transparent, low-cost generic drugs. Both partnerships enable members to use their insurance cards to access Cost Plus Drugs’ affordable pricing, emphasizing transparency and cost savings in healthcare
Dashevsky’s Dissection
In my article, 16 Healthcare Predictions for 2025: Digital Health, AI, Policy, and Beyond, I listed my ninth prediction: “CMS Considers Partnership with Cost Plus Drugs.”
I recognized that a CMS x Cost Plus Drugs partnership may be more of a wish than a prediction. But either way, I think such a partnership should be considered to save CMS (and taxpayers) money.
If we take a step back and really look at what Cost Plus Drugs is doing—big picture view—we realize they’re doing what policymakers are taking too long to do: cutting out the expensive middlemen.
Four studies provide evidence that such a partnership would be beneficial:
A study published in the Annals of Internal Medicine showed potential prescription drug cost savings of $3.3 billion for Medicare Part D beneficiaries in 2020 if they had used Cost Plus Drugs, accounting for approximately 36% of total Medicare Part D spending.
A study in the Journal of Urology found that Cost Plus Drugs could generate significant Medicare savings on common urology drugs through its cost-plus pricing model. Cost Plus Drugs showed potential savings ranging from 48.7% to 99.2% across different urological drugs, with potential savings estimated at $1.29 billion for 2020.
A study in the Journal of Clinical Oncology analyzed potential cost savings for seven popular oncology drugs if beneficiaries used Cost Plus Drugs’ pricing instead of Medicare Part D pricing in 2022. The authors found $661.8 million (78.8%) of potential savings if the average Medicare Part D price for these seven oncology drugs were Cost Plus Drugs prices instead.
A study in PharmacoEconomics estimated that Medicare Part D could save up to $8.6 billion annually by adopting Cost Plus Drugs’ 90-day pricing for generic medications. The study found nearly 80% of examined drugs to be more cost-effective through Cost Plus Drugs’ transparent pricing, with significant savings across specialties like cardiology, psychiatry, and oncology.
I assume strong lobbying from PBMs would prevent such a partnership from occurring. But the optimist in me says, “Look how far Cost Plus Drugs has come within the past three years. Surely it can be done.” We’ll see!
In summary, Cost Plus Drugs is cutting out the middlemen and forging innovative partnerships with health systems, pharmacies, PBMs, and payers. With studies showing billions in potential Medicare savings, a CMS partnership feels like the logical next step—if it can overcome the inevitable pushback from the status quo (read: The Lindy Effect and the U.S. Healthcare System: Understanding Complexity and Enduring Challenges).
Have you used Cost Plus Drugs for yourself, patients, or employees? |
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