Quick Comment – Drug Industry, Disrupted
Looks like I was onto something on September 1 when I wrote...
It's rare you see something this big get this disrupted this fast – and almost entirely by word-of-mouth...
I’ve been tilting against what I call “the legal drug cartel” of pharmacy benefit managers, or PBMs for years, including this piece last June... and this one back in 2012.
It appears that CVS, which itself owns a PBM, finally got the memo...
The company today formally announced that it is rolling out “a more transparent” way of pricing drugs for consumers.
While details are still skimpy, the plan sounds awfully similar to the “cost plus” model promoted by Mark Cuban though his Mark Cuban’s Cost Plus Drugs, which bases its price on generic drugs at cost plus a small markup.
As I’ve written in the past, Cuban’s prices are so low that this year I shifted 60% of my daily pharmaceutical cocktail for no other reason than they’re cheaper than anything else I could find... in some cases, by an enormous amount.
Then there was that move a few months ago by Blue Shield of California, which dropped CVS as its pharmacy benefit manager in favor others, including Mark Cuban’s company and Amazon.
Blue Shield obviously was fed up, telling the Wall Street Journal...
The current pharmacy supply chain is a forest of opacity and profit. It is overwhelmingly complex, it is designed to maximize the earnings of the participants.
Bottom line... people are mad as hell about drug pricing and they’re clearly not going to take it anymore. The PBM industry has always been an opaque black box. CVS claims this move is designed for more transparency. Right now this is a good headline and story. The proof will be in the pricing.
In my quest avoid becoming noise, I’m experimenting with the concept of occasional “quick comments” on stories in my orbit. If you liked this, please click the heart below. If you have an opinion on the concept of “quick comments,” or the topic, don’t hesitate letting me know. Thanks! Herb
DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!)
Feel free to contact me at herbgreenberg@substack.com. You can follow me on Threads @herbgreenberg.
Interesting development ... but raises new question.
Can CostPlusDrugs compete with CVS? Why would you want to?
Footnote: PBMs are easy targets - but for every $100 we spend on prescription drugs - about $5 goes to PBMs (generic/brand combined) - and their profit margin is even less. (~2%)
Enjoyed the insight. I have been using Cost Plus for a while and enjoy their prices and transparency. Enjoyed meeting you both on your recent travels.