Earlier this week, Amazon launched RxPass, a prescription drug service that costs Prime members $5 a month for as many eligible generic medications as they need. The announcement follows the unveiling, last January, of another novel prescription initiative, Cost Plus Drug Company, an online pharmacy developed by billionaire entrepreneur Mark Cuban. By cutting out middlemen, Cuban promises to offer many generic drugs for a fraction of the cost that other pharmacies charge. Both endeavors yank health insurance from the equation, allowing the process of buying prescriptions to feel a bit more like buying paper towels.
Because the average American spends around $1,300 a year for prescription drugs, more than people in any other country, and millions of Americans are underinsured, the announcements have generated lots of interest. Given that this is Mark Cuban, the larger-than-life investor extraordinaire of Shark Tank fame, and Amazon, the society-altering guilty addiction, it’s natural to expect that both endeavors will disrupt and deliver.
I reached out to a bunch of specialists in drug pricing to see what they thought. Most were quite tempered about just how revolutionary either project is. Here’s a look at why that is, how it’s possible for Cuban and Amazon to still make millions while charging so little, and some guidance on how to actually find the cheapest generics.
Let’s begin with Amazon. The company has maintained an online pharmacy for more than two years. What’s different about this new offering is that for a flat fee, you can obtain all the eligible generic prescriptions you need. Get your Lisinopril, a widely prescribed high-blood-pressure medication; your Estradiol, an estrogen hormone drug; and depression-treating Bupropion, the generic version of Wellbutrin, for just $5, including shipping! In order to participate, you must first have an Amazon Prime account, something that currently costs $139 per year. Still, given that more than 200 million people are already Prime members, this seems huge.
It’s not, said Karen Van Nuys, the executive director of the Value of Life Sciences Innovation program at the USC Schaeffer Center for Health Policy & Economics, who called the announcement “less exciting than it maybe could have been.” Lots of generic drugs only cost pennies a pill, said Van Nuys, who published an illuminating report on generic drug pricing last year. Plus, Amazon’s list only includes 50 or so generic drugs. Therefore she feels that $5 for 30 days’ worth isn’t actually that impressive. Though you’ll never go above $5, it’s unlikely that someone who takes multiple medications would find them all covered. Others noted that though focusing on generics is helpful—since they account for the majority of prescriptions—often the most expensive medications are brand-name drugs. The pass is also off-limits to customers in a handful of states, including California, and individuals with Medicare and Medicaid.
Still, it’s no mystery why this is a smart move for Amazon. First of all, because most of the generics they are including are so cheap—and they already have shipping infrastructure set up —it likely won’t be hard for them to break even. And once they start delivering medications in a few hours, this will boost their appeal further. “Amazon’s real goal is probably to be the king of online pharmacies, replacing many retail, in-person pharmacies over time,” said John Lu, a health economist who is the director of the UCLA Seminar on Pharmaceutical Economics and Policy, over email. He offered the helpful context that the average retail cost for a generic is somewhere between $20 and $30.
Now let’s look at Mark Cuban’s effort. Cuban’s Cost Plus Drug Company is offering hundreds of generic medications. The pitch is that Cuban negotiates directly with wholesalers and bypasses price-inflating middlemen. Then, in an unusually transparent move, he marks up all prices by just 15 percent, and tacks on a $3 pharmacy fee and $5 shipping fee. Unlike with Amazon, there are no major restrictions on who can use it and no membership is required. Let’s revisit those same drugs from before:
• Lisinopril: Starting at $8.60 for 30 pills from Cuban, including shipping.
• Estradiol: Starting at $10.10 including shipping.
• Bupropion: Starting at $9.80 including shipping.
Where Cuban’s effort really stands out is with many drugs not offered through Amazon. One example Cuban likes to tout: Imatinib, a generic leukemia treatment. He charges around $47 per month, while other retailers charge $9,657, he declared in a press release last year.
Still, this could exaggerate the novelty of what he’s offering. Craig Garthwaite, a professor who studies pricing and innovation in the biopharmaceutical sector at Northwestern University Kellogg School of Management, noted that cheaper options have long been available if you knew where to look.
Since Imatinib appears in many news articles about Cost Plus, let’s use 60 100-milligram tablets as an example:
• Cost to manufacture, according to Cost Plus site: $19.80
• Cost to purchase from Cost Plus: $25.80 plus $5 shipping, so $30.80
• Costco: around $130.
• GeniusRx: $120.
• GoodRx’s prescription comparison tool (very useful for comparing options!) shows that while CVS charges $10,624 and RiteAid charges $5,460, you can also get a coupon to bring it down to $547 at CVS and $51 at RiteAid.
• Amazon and Walmart: not available.
Yes, Cuban beats them all. And even if the vouchers came closer to Cuban’s prices, there are many reasons why forcing people to become coupon experts is not the optimal way to counter inflated drug costs. But the savings aren’t quite as dramatic as some framings of his endeavor have made it seem. Still, his project, along with Amazon’s, offers an important reminder: generic drug prices are far from standard across the board, and so we should be shopping around.
They offer a second lesson as well: Insurance is not always as helpful as many of us assume it is. Both Amazon and Cuban are offering these excellent prices without insurance. How is that possible?! Largely because “generic medicines are often exploited by middlemen that seize significant profits at the expense of patients and the companies that make the medicines,” explained Allen Goldberg, a spokesman for the Association for Accessible Medicines, a trade organization representing manufacturers and distributors of generic prescription drugs. Sometimes that means that despite all that effort you go through to dig up your insurance card number, you’d pay the same amount without it.
Occasionally, as Van Nuys at USC has found, that means that you’d pay more. Yes, more! The good news for uninsured and underinsured people: if a generic is available, with careful sourcing, you may be able to avoid any cost disadvantage.
