Cuban Continues His Attack on Big Pharma

June 13, 2023

In an effort to continue highlighting Mark Cuban's attacks to the status quo of the healthcare industry, we are thrilled to share another groundbreaking development in his fight against big pharma. Cuban, along with biosimilar maker Coherus BioSciences, announced on June 1st that they are set to introduce a biosimilar version of Humira, the world's highest-grossing drug, on Cuban’s website This move aims to make the drug more accessible by offering it at a significantly discounted price of $569.27 in cash plus fees, a whopping 90% lower than the $6,922 charged by the branded drug manufacturer, AbbVie. The announcement had an immediate effect on AbbVie’s share price, sending the stock down 3% on June 1st.

We’ve previously written about Mark Cuban Cost Plus Drugs’ (MCCPD) strategic partnerships with companies who share similar goals. This Biotech relationship is no different. Coherus BioSciences, as a smaller player targeting around 10% market share, understands the challenges posed by the current system. CEO Dennis Lanfear highlights their goal of offering a low-priced alternative for the uninsured or underinsured. This collaboration with Mark Cuban is just one aspect of Coherus' strategy, as the company is also exploring partnerships with health plans that prioritize low list prices over the rebate model. Cuban may be seen to be leading the charge, but there are certainly others out there who are fed up with the current system.

You have likely seen many commercials advertising Humira. The advertisements mainly target those suffering from rheumatoid arthritis, plaque psoriasis, and Crohn’s disease. Humira is a TNF blocker which means that it affects your immune system, reducing the effects of substance in the body that can cause inflammation. Globally, more than 1.4 million people have used the drug. The variety of use, worldwide reach, and high prices have caused Humira and AbbVie to be responsible for a large chunk of Medicare spending in the US, accounting for more than $5.7 billion of Medicare Part D spending in 2019. For the uninsured, this medication can cost more than $80k per year. With a biosimilar drug on the market with a 90% discount, we could see this portion of spending slashed. The potential is huge.

While this announcement sent reverberations through the industry and affected AbbVie's stock, it is important to note that this endeavor alone may not be enough to revolutionize the system. The reason for this lies in the complex dynamics involving pharmacy-benefit managers (PBMs) who wield significant control over how most Americans obtain their medications. It may seem like common sense that the market would favor a drug with such a smaller price tag, but unfortunately, that is often not the case. With the involvement of PBMs in our healthcare system, we have a counterintuitive dynamic regarding drug prices. Anti-kickback laws usually prevent this kind of price gouging, but PBMs are excluded from these laws.

When pharmaceutical companies offer a drug on the market, it is the standard to price it substantially high. Then, they offer the drug to PBMs with significant rebates. The PBMs and pharmaceutical companies negotiate this rebate, and some of these savings are passed to the consumer, but the primary beneficiary of the rebates are the PBMs. This stream of income accounts for the majority of PBMs’ revenue. For example, Johnson & Johnson's drug unit disclosed paying $39 billion in rebates, discounts, and fees in 2022. This flawed structure was further evident when Amgen, the first to introduce a biosimilar of Humira earlier this year, offered two pricing options: a 5% discount or a 55% discount, knowing that a significant portion of the market would still prefer the more expensive version. So, the higher the price, the higher the rebate potential. Cuban’s move is a great step in the right direction, but it’s clear that those who determine drug prices in the US have misaligned incentives.

When we started this series, we didn’t know how far Mark Cuban’s Cost Plus Drug Company would go in helping to fix our healthcare system. However, each time we’ve written on the topic, the effect has continued to grow. Cuban, his company, and others with a similar objective may not be able to fix this themselves, but luckily there are other players at work. There have been bipartisan efforts in Washington to tackle PBMs. Unfortunately, this may not yield substantial changes. Legislators fail to address the fundamental flaw of statutory exemptions in the anti-kickback law, which legally permits PBMs to receive kickbacks from drug manufacturers. The Federal Trade Commission (FTC) is currently investigating PBM practices and is expected to take action by the end of this year. Such comprehensive efforts to target the system's shortfalls may provide a more substantial resolution.

Nonetheless, we consider this move to be a significant step forward, providing a cost-effective biosimilar alternative to Humira while demonstrating that there are better alternatives to our current system. The availability of a discounted biosimilar also offers an opportunity for uninsured or underinsured patients to purchase the drug more affordably, bypassing the traditional system. Additionally, this development puts pressure on other biosimilar makers to offer competitive pricing or increased rebates, potentially benefiting patients and reducing drug spending in the long run. Mark Cuban's endeavor to decrease drug prices, particularly for blockbuster drugs like Humira, has the potential to reshape the healthcare industry and benefit patients, payers, and the system as a whole. If his company fails to make that impact by itself, at the very least, they are bringing these issues to light, proving that something must be done. While challenges persist within the complex drug pricing ecosystem, efforts to address market distortions and empower patients with affordable alternatives are steps in the right direction.

If you haven’t had a chance to check out Cuban’s website, please give it a visit and let us know how your experience was. If this is the first DWM blog you are seeing about MCCPD’s effort to remedy the US healthcare system, you can read the first one here and the second one here.

Detterbeck Wealth Management is a fee-only financial planning / wealth management company with offices located in Palatine, IL (Chicago area) and Charleston, SC areas serving clients locally and across the country. To contact us about setting up an appointment, please see our contact us page