There isn’t much in today’s world that gets as complicated as navigating your medical needs. From weighing different insurance plans, applying for public reimbursement, and even finding the right prescription, it seems like seeking help can cause additional stresses unneeded for someone going through some sort of medical situation in the first place.
A large portion of this debate stems from the overarching debate on why healthcare is so complex and complicated in the first place. Whether it’s discussions around the usefulness of public coverage, the efficiency of private care, and the accessibility of both to the people, it’s likely that most will walk away with more questions than answers.
Indeed, despite almost half of adults in America thinking public access programs like Medicare for all is helpful in concept, a vast majority of them still remain confused about how accessing medicines is done in actuality. Here is where true innovators can step in to attempt to fill this gap between where the public wants to be and where they currently are. Based on a much-lauded earlier announcement via Twitter earlier this year, it seems that Mark Cuban has done just that with Cost Plus.
Cost Plus has been on the newswire as of late due to its fairly innovative approach to tackling the pharmaceutical industry, in that it is looking to bring down the cost barriers that affect so many in the general public.
A key facet to this is Cost Plus’ business model, which takes a hard look at the standard operating practices that many industries take on their value chain and decides to cut as much as they can to deliver the savings to the buyer. Cost Plus bypasses the traditional warehousing, distributor, and retailer model that plagues a lot of brick-and-mortar businesses by keeping their business lean and online. A big part of the spending in traditional pharmaceuticals goes towards Pharmacy Benefit Managers, or PBMs, that often negotiate prices on drugs but rarely pass the savings to the customers themselves. This means that Cost Plus keeps its prices low by essentially charging manufacturing costs, a flat 15% margin, and a pharmacist’s fee of $3 (but not allowing any health insurance to be used).
It might not seem like a revolutionary business model, with other online pharmacies largely following a similar principle in designing their operational processes to deliver as much value at the least cost. But what keeps Cost Plus on the map is its ability to turn these savings much more visibly with direct price comparisons to some of the major drugs being used in the market. For example, the drug Mesalamine, commonly known as Canasa, is used widely to treat a bowel disease known as ulcerative proctitis. Without easy access to generics like this, consumers will need to spend about $766.80 to get the proper medication to treat their condition. Cost Plus reduces this price greatly down to around $30 for a full series of medications for the month.
Cost Plus is also just getting started. As part of their initial launch, they have begun producing and marketing around 100 different generic drugs with fulfillment provided by digital health unicorn Truepill. Cost Plus has also invested in a larger facility in Dallas, which is projected to further expand the company’s efforts beyond just the acquisition and marketing of generic medication but to the manufacturing of them as well. This facility is designed to be efficient and sustainable, responding to sudden shortages in supply, flexible in development, as well as support all other business activities related to their operations.
Despite Cost Plus not exactly being the first one to develop a cheaper alternative to branded and pharmacy-based medication, it’s certainly the one causing the most waves at the moment. Part of it is likely due to Cuban’s involvement himself, where his maverick investment attitudes lend to the feeling of business innovation in a much-overlooked space of the healthcare industry.
Another factor is likely the involvement of Dr. Alex Oshmyansky, who was announced on Twitter as one of the driving forces out of his doctorate to convince Cuban of this new and possibly revolutionary venture. In fact, Dr. Oshmyanksy, heralded as a genius by his peers, helms the rein as CEO of Cost Plus, utilizing his immense intelligence and combination of mathematics and medicine to better guide the business towards a new and exciting business model.
Cost Plus has also made apparent the many inefficiencies that the current healthcare market is going through. Professor Erwin Loh, in a recent Linkedin post, shared that Cuban and Oshmyanksy’s system could have saved the government $1.7 billion in healthcare spending if they had opted to utilize some of Cost Plus’ generics instead of sourcing them from a pharmacy directly.
Understanding what makes the healthcare system difficult can be a moot effort due to the multitude of different factors in the effect, though that only allowed for companies like Cost Plus to come into the market with a better business model for consumers. Through a simple and transparent pricing model, consumers (and other businesses) can better understand where the value of the drug being sold comes from.
Cost Plus is at the forefront of something new and exciting. Coming in as a new player in the already expanding online pharmacy market, Cost Plus can further revolutionize its stance as a leader in the generics market by further breaking down the different barriers to consumer healthcare in the country.
There remain even more possible efficiencies to further lower costs through possible automation of specific business activities, such as outbound logistics and eventual manufacturing. It's the latter aspects pertaining to their drug manufacturing that will likely give them the competitive edge they will need.
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