Kroger and Mark Cuban join forces to spread the availability of low cost prescription drugs

Photo (c) Shana Novak - Getty Images

The partnership could be bad news for pharmacy benefit managers

Little by little, pharmacy benefit managers (PBMs) are getting their comeuppance and American consumers are getting their due when it comes to the cost of prescription drugs.

Mark Cuban’s Cost Plus Drugs has cut a deal with Kroger that will give consumers in 35 states the power to find the lowest price for a prescription drug.

Anyone who’s watched ‘Shark Tank’ knows that Cuban is a take-no-prisoners kind of guy and he apparently sees an opportunity when it comes to high-priced drugs.

The Cost Plus business model is simple. It marks up each drug by 15% and adds a $3 pharmacy fee where applicable. The company makes a profit and customers can finally get their prescriptions filled without taking out a loan.

Cuban’s company said the deal includes more than 2,000 of the Kroger family stores:

  • Baker’s

  • City Market

  • Dillons

  • Food 4 Less

  • Foods Co

  • Fred Meyer

  • Fry’s

  • Gerbes

  • Jay C Food Store

  • King Soopers

  • Kroger

  • Mariano’s

  • Metro Market

  • Pay-Less Super Markets

  • Pick’n Save

  • QFC

  • Ralphs

  • Ruler

  • Smith’s Food and Drug

The cost savings are impressive

One of the beauties of Cuban’s business model is transparency. For example, when ConsumerAffairs researched the price of the most prescribed drugs in the U.S., Cost Plus listed Amlodipine – a drug that nearly 70 million Americans take to treat excessive blood pressure and manage coronary artery disease – is available at Cost Plus for $3.60 (30 count supply of 2.5mg dosage).

Cost Plus also shows you the price at other pharmacies -- $50.10; what it cost to manufacture the drug ($0.30); Cost Plus’ 15% markup ($0.30); the pharmacy’s labor fee ($3); and the total savings to the customer of $46.50.

When we checked Pantropozole, the 20th most prescribed drug, it came in at a purchase price of $4.50. Cost Plus also displayed the $71.40 price it would cost at other pharmacies; what it cost to manufacture the drug ($1.20); Cost Plus’ 15% markup ($0.30); the pharmacy’s labor fee ($3); and the total savings to the customer of $66.90.

Cuban claims that those prices could get even better, too. “As we grow and our costs go down, we will always pass those savings on to you,” he said in his company’s mission statement.

Consumers may be getting more transparency

Cost Plus could be a thorn in the side of PBMs as the industry also faces regulatory pressure. An FTC committee recently voted to withdraw its opposition to state legislation that would boost transparency over entities managing prescription drug benefits. 

The vote is the latest chess move in the agency’s effort to contemporize its view of PBMs. There’s a lot going on with PBMs. In the FTC's viewpoint, they act as middlemen, negotiate rebates and fees with drug manufacturers, create drug formularies, which are lists of medications that are covered by insurance, and reimburse pharmacies for patients’ prescriptions, etc.

But the two things currently at the heart of the FTC’s investigation are whether or not PBM practices are anticompetitive, and whether they hinder patient access to affordable medications. 

“I have no choice but to use this company for my employer-sponsored healthcare plan," Susanna, of Pasadena, Calif., wrote in a ConsumerAffairs review of Express Scripts. "Out of the blue, with no notice, they denied a prescription I have been taking through them for the past several years. They claim I need to try generic when there is no generic equivalent. Basically, they are forcing me off a doctor-prescribed medication that I need to function, with no recourse.”

PBMs and drug manufacturers have long argued about who is responsible for high drug prices. In a recent report, the Bipartisan Policy Center said "there is evidence PBMs may be passing too little of that savings on to customers" but left open the question whether PBMs are the right target.

Express Scripts won’t be the only company that may be asked to explain itself. The compulsory orders will require the other large PBMs in the U.S. to provide information and records on their business practices, too.

Those companies include: CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions, Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc.; Zinc Health Services, LLC; and Ascent Health Services, LLC.

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