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Either I don't understand the phrase "Vertical integration" or Mark Cuban doesn't. Cuban says "We basically created a vertically integrated manufacturing compa

• mgerdts 5y ago
  it seems manufacturing is on the todo list. https://khn.org/morning-breakout/mark-cuban-unveils-plan-to-build-dallas-factory-for-new-drug-company/ https://khn.org/morning-breakout/mark-cuban-unveils-plan-to-...
  • deleted 5y ago
    [deleted]
• s1artibartfast 5y ago
  They plan to both manufacture and resell. >15% markup plus pharmacy fee plus shipping and handling. This is the intent, and still cuts out at least 2 middle men between consumers and manufacturers: the insurance company and pharmacy benefit managers.
  • alphabettsy 5y ago
    There were already many companies doing this.
    • lelandfe 5y ago
      Yeah. It seems the difference here is (supposedly) this sentiment: > "People always ask, well why didn't somebody do this before? The reality is there's so much money there, it's hard not to be greedy," Mr. Cuban said > "But I won't. I've got enough money. I'd rather f— up the drug industry in every way possible."
      • ipaddr 5y ago
        For a person with enough money he seems to work harder than he should to obtain more and more.
        • csdvrx 5y ago
          > For a person with enough money he seems to work harder than he should to obtain more and more. Some people like to max their points in videogames. Other like to max their $ in real life. The beauty of capitalism is that the effort of the latter end up benefiting us all.
          • friedturkey 5y ago
            Capitalism is what got America into its health care mess. Other countries aren't paying thousands for simple pills or insulin.
            • adventured 5y ago
              When has the US had a Capitalist market for healthcare? The US has a particularly horrible hyper regulated, government shielded, cartel-based healthcare system and has for decades - the time during which its healthcare costs have skyrocketed out of control. The US could hardly be further away from Capitalism in how its healthcare system is structured.
              • friedturkey 5y ago
                If you really think dropping regulations and making it a free for all for multi-billion dollar corporations to fiddle with our health would improve anything, you're simply lying lol Countries with more regulation and more control by the state have... prices that are a fraction of the US. Surprise. Just like countries with stricter environmental restrictions have fewer clear-cut forests, less polluted water, etc. Unbridled capitalism means more money at the top at the cost of everyone else. There's a balance to be found between making money and having some restraints.
  • adam_arthur 5y ago
    Should cut out the doctors for most of these too... Or at least allow people to continue to renew their medications after prescribed one time, rather than requiring further doctor's visits. Most things in medicine are expensive due to legal monopolies/improper regulations. e.g. no reason you shouldn't be able to buy prescription glasses for $10-20 dollars off the shelf. The main problem with medical costs is that it's not a free enough market, with sufficient competition.
    • danachow 5y ago
      I’m not saying freer markets in some aspects of medicine would be better - but the libertarian dream in medicine is probably very naive and fails to learn from history to boot (medicine, especially pharm was much freer 120 years ago - it didn’t work out too well). And of the big problems in medicine - a prescription for glasses (which isn’t really a medical service in the US - optometry is not a medical profession) just doesn’t register for me - you can order glasses online without a prescription if you are so inclined. Meanwhile there isn’t any realistic libertarian solution to allocation or access to complex medical care - and just hand waving “free markets” doesn’t make it so.
      • adam_arthur 5y ago
        You can't order corrective lenses online without a prescription. You can order frames, or reading glasses. You need a prescription for both contacts or the lenses themselves. Contacts would certainly be much cheaper without that hurdle. And I bring up vision, because it's a common problem and for less well off folk with families it can be a big expense, basically entirely unnecessarily so. Imagine making 20k/year and you have to pay $500-$1000 a year for vision correction for your family. That's 2.5-5% of your pretax compensation There's no handwaving here. Competitive markets require complete information. Information about costs to the consumer is basically entirely opaque. Over 90% of medical costs are non emergency, so if people could comparison shop, costs would go down. Also requires skin in the game (e.g. marginal cost per visit). Look at plastic surgery for a good example of how free market/non insurance based medicine can fare. Many procedures are quite cheap, and while many are still expensive, much cheaper than necessary medical care covered by insurance. Also the number of doctors is still limited by the AMA, so even this is not fully competitive. There's an arbitrary cap on number of providers
  • ALittleLight 5y ago
    It doesn't cut out any middlemen. It adds one middleman - Mark Cuban. Literally all he is doing is buying wholesale and selling retail with a markup. He's even powered by an existing online pharmacy company (truepill). If you look up details about his factory it's supposed to be built sometime next year. On Google maps, looking at the address, I wasn't able to see any evidence of this place existing. It's also supposed to employ 60-80 people, which, seems small to take on drug manufacturing.
    • s1artibartfast 5y ago
      >It doesn't cut out any middlemen. I listed two, do you disagree that they are removed?
      • Scoundreller 5y ago
        Is there a pharmacy that requires the use of an insurance company or a PBM? I thought involving them was always voluntary (and someones people would pay 100% of the “cash” price because it can be less than a copay).
        • s1artibartfast 5y ago
          Yes for PBM because that is where the pharmacy buys the drug, not the manufacturer. Manufacturers usually can't sell direct to pharmacies. You can usually pay cash at a pharmacy, skipping insurance
          • Scoundreller 5y ago
            The pharmacy will buy the drug from a distributor, not the PBM. The PBM manages the insurance. These may all be standalone operations, or one corp with its hands in each pocket: PBM, pharmacy, insurer and distributor.
            • s1artibartfast 5y ago
              That is correct. My point was to highlight that there is a lot more to the supply chain than manufacturer to pharmacy, with intense negotiations and fake pricing at each step
• refurb 5y ago
  Yup, as someone who had some experience in the industry, this screams naivety. Generic drugs are pumped out for pennies a pill by a pre-existing infrastructure across the globe. Mark will be buying from them, not spending billions trying to replicate manufacturing plants and FDA agreements. In essence it’s a cash-only pharmacy for cheap generic drugs - not that different than what Walmart and Target do with their $4/month prescription drug program. Big pharma won’t give a shit because Mark can’t make his own generic versions due to IP. He might make a difference for those weird edge cases like Daraprim (sp?) where the market is so small, supply is constrained, so mark ups are huge. But those are weird edge cases that don’t last long.
  • dreamcompiler 5y ago
    > Big pharma won’t give a shit because Mark can’t make his own generic versions due to IP. Of course there's no IP protection; that's the definition of "generic." But that doesn't mean big pharma won't care. 20 years ago they might not have cared. Nowadays big pharma has learned how to game the generics industry to become sole-source generic providers and set prices as high as they wish, even without IP protection. It's this abuse of the generic marketplace that Cuban seems to be taking on.
• purplepatrick 5y ago
  It’s a startup, so it’s an iterative approach. They launched with a setup that gets them into the market fast. However, you are right in that this ain’t that big of a deal. Pharmacies pay the acquisition price for the drugs. Then, they make up a fictitious price (called the Usual & Customary price). The U&C is intentionally very high, because it forms the basis for negotiating with pharmacy benefit managers (PBMs). The Cuban-funded venture uses this as their price comp, calling it the “retail price”. However, the U&C price is only the retail price for one group of people: those without insurance who do not know of drug discount “cards” (nowadays mostly mobile apps such as GoodRx nowadays). Basically, anyone with insurance or a (free) discount card will get a hefty discount on the U&C (always compare the two before using insurance, as sometimes, the “regular” discount is higher than the insurance one). Just plug some of the expensive drugs into GoodRx et al to compare and you’ll find that in some geographies, the Cuban-funded co is cheaper, while in others, it is more expensive (drug discounts vary across pharmacy geo. locations). Pharmacies give non-PBM entities discounts bec they make money regardless. Let’s say, you start an Rx discount biz. You can go to pharmacies and negotiate a discount plus a small margin for yourself. This is how GoodRx is making (lots of) money, for example. Now, the innovation with this new co is that previously, drug discount cards and pharmacies were usually two different parties. All they did was to partner with a mail order pharmacy, negotiate a discount (acquisition + 15% is the classic Costco pharmacy price btw), set up a website, and tell everyone “look at how much cheaper we are!”. The future vertical integration comes from taking this a step further and partnering with generic drug makers. I also suspect that at some point, they’ll start their own pharmacy. I’ve been waiting for GoodRx or another discount provider to bundle these 2-3 steps in the distribution chain, but they have never done this. Perhaps they worried about competing with their pharmacy customers, as their model is going wide, rather than deep, while this new Cuban-funded venture is going deep instead, partnering with a single pharmacy. Beats me why their pharmacy partner (or other such cos) wouldn’t just start adding their own discount biz. But perhaps they’re doing that and they had other reasons to do this…
  • s1artibartfast 5y ago
    DO you have a source that the Cuban applies the 15% to the Usual & Customary Price, not the acquisition price? It has certainly been implied to be the latter.
• throwaway78987 5y ago
  Ok; personally knew Alex. I think there is a lack of understanding here. Yes maybe you can get some drugs cheaper at Walmart, but certainly not all “generic” drugs. Once a drug is outside patent protection, others can manufacture it but you have to show equivalence, which can require samples from the original or existing manufacturers, who can and have tightly controlled distribution to make it very challenging to get approval. Couple that with the risk of an existing manufacturer just dropping the price to eliminate any potential profit and you can see how some drugs can get into the place where there is only one source that can raise their prices as they see fit. I believe the idea here is they will eventually manufacture or source those drugs that are patent unencumbered but sole source. Yes, the system is terribly imperfect (both a physician and a chemical engineer here). Yes, it doesn’t sound like this is a charity. But expecting that the walls of regulatory capture to just fall down because it would better for all of us is just wishful thinking. Let’s save our criticism for those raising the prices of epi-pens and what not year over year. I think the criticism here is misplaced - the company was incorporated with a public mission in mind, and they seem to be moving into manufacturing; it wouldn’t make much sense to make something that can already be sold at Walmart for $4. Let’s see how it goes and wish them the best.
  • ALittleLight 5y ago
    This article is simply saying things that are wrong. That merits criticism regardless of what other people may or may not be doing. Their company isn't vertically integrated. They are reselling generics drugs online and may build a small factory in the future.
  • pierrefermat1 5y ago
    This response makes no sense whatsoever, the parent comment was making a criticism for falsely using the phrase vertical integrated which you do not address at all