If the head of a generic drug manufacturer in the pharmaceutical industry said she wanted to own a basketball team when she grew up, no one would be surprised. Everyone knows basketball is fun and people like it.
But when Mark Cuban, best known to most Americans as the guy from Shark Tank who owns the Dallas Mavericks, announced he would now be manufacturing generic pharmaceuticals, most of us cocked our heads to the side like a confounded puppy.
“Wait… he wants to… what??”
Seconds after the head-tilt, the rumor mill activates in text threads and tweetstorms across the whole pharma industry.
“He’s just trying to poke at Trump.”
“Someone on Twitter told him to.”
“He must have interest in an insurance company.”
“He has a rare disease and he wants to manufacture his own pills.”
“It’s for his brand- look like he’s helping the everyday person while making a fortune.”
Somewhere, a voice in the corner ventures, “I think he really wants to help people.”
Can we back up a sec? What is actually happening here?
The pharmaceutical industry was surprised to hear that Mark Cuban had taken an interest in us at all, let alone in such a specific area as generic drug manufacturing. Even more surprising, it’s more than an interest. He has an actual plan, and that plan is both informed and practical,if a bit radical.
His new venture, Mark Cuban Cost Plus Drug Company Pharmaceutical, pbc, aims to make generic medications affordable for those who need them, serving a side of transparency alongside the savings.
Sounds great! So why the frenzy? For many of us who have spent our careers navigating pricing secrecy and mazes of red tape in the pharmaceutical industry, it seems cocky. A little too confident.
“Who does he think he is?”
“Why does he think he can just up and start a generics manufacturing company?”
“What could an outsider possibly see that we don’t?”
That last one is the right question.
Mark Cuban’s entry into the pharmaceutical industry may seem to have come out of left field, but is it? Or have we been too busy changing our Zoom backgrounds to notice what was happening? Let’s look back before we imagine forward.
If you’re just hearing Mark Cuban’s opinions about the pharmaceutical industry for the first time, you may have missed a few things. Here’s a quick timeline to get you up to speed:
Within the pharmaceutical industry, the entry of generic drugs is a sign to the big brands that it’s time to move on to the next project. It’s like, “welp, we had the market until those generics rolled into town.”
Once the initial science is developed and approved, generic drug companies have significantly lower overhead and risk to bring their drugs to market than their brand-name counterparts incur with the initial product launch.
Even the FDA approval process is simplified. New brand-name drugs file an NDA (New Drug Application), a process that feels endless and endures the highest level of scrutiny imaginable. That’s to be expected, and while it can be frustrating, it’s part of the process. We only want to release safe drugs, so we’re good with this.
On the other hand, when a generic version of the drug files for approval, they use an ANDA [Abbreviated New Drug Application]. This is a fancy way of saying “ditto” to the bulk of the original drug’s application, then adding anything that differentiates them.
Add to that, pricing can be much more competitive for generics because they aren’t incurring the costs of development from Point A (idea) to Point Z (product launch). This process, incurred by the big brand-name drug manufacturers, is, to put it mildly, expensive.
Not only is research, development, and marketing expensive, but so often the expenses we incur in creating an original drug are way outside the lines of just the items on our shopping list. Our list might include a single molecule we need to be able to deliver the treatment to a patient’s cells.
For example, in the case of Chron’s biologic treatment Humira, Knoll Pharmaceuticals, a unit of BANF, had the golden molecule. Abbott Laboratories had that molecule on their must-have list. They needed the molecule to be able to manufacture Humira and bring it to market.
Abbott paid $6.9B to acquire Knoll, which included Knoll’s whole experimental drug pipeline, and all the rest of Knoll’s “things.” That molecule was one of those things. Quite an expensive item for a drug development shopping list, but not at all uncommon.
It would be unheard of for a generic drug manufacturer to incur an expense like this. Mark Cuban is probably very glad to know that.
The pharmaceutical industry’s development process is also risky. For all the good we’ve been able to do, we also have a staggering failure rate. Only about one in every 5,000 drugs we develop makes it all the way through to Point Z.
That’s a major reason why new, brand-name drugs are so expensive. The pharmaceutical industry model is designed so that our successes fund our efforts. We have to price that one successful drug high enough so we can keep trying 4,999 other things with the hopes they’ll work out and help people. Our priority is to be as open, innovative, and committed to discovery as possible.
Generic drug manufacturers get to start later in the alphabet. Point Y might be a stretch, but let’s just use it to illustrate our point: for Mark Cuban, starting at Point Y is an easier and faster way to get his startup’s MVP (Minimum Viable Product) to market than starting at Point A.
If you know Mark Cuban’s ethos, you know he also stands behind the quality of every product or experience he puts his name on. With generic drugs, he is able to offer products with the same level of safety, strength, dosage, efficacy, route of administration, performance characteristics, and intended use as many name-brand pharmaceutical products. He knows he won’t have to sacrifice quality for margins.
If we had to sum up Mark Cuban’s philosophy on investing, we’d say he looks for opportunities to offer:
The generic drug manufacturing business within the pharmaceutical industry checks all these boxes for the savvy investor.
Let’s own up to the fact that the pharmaceutical industry is, in fact, an industry. We are in business. More customers = more business. Plus, we want to help as many people as possible, so we often focus on developing drugs that give us the highest chance of treating more patients and making higher volumes of sales.
Of course, with every high-volume need and high-volume product, there is also high-volume competition.
Shark Tank fans get this. Think of any episode you’ve ever seen. Someone always asks, “who’s your competition?” If a founder is pitching a new product offering within a saturated market, it’s very likely you’ll hear “for that reason, I’m out,” from Mark Cuban and his fellow Sharks.
Cuban has been famously quoted as saying, “Creating opportunities means looking where others are not.” While this strategy of developing treatments for rare diseases has been gaining traction in the pharmaceutical industry in recent years, it’s still a relatively “blue ocean,” meaning it has lots of room to dominate waters where the fish (sales) have not already been overeaten by sharks (your competitors).
Mark Cuban has a pattern of investing in solutions that rely on increased transparency. In 2012, he opened an email from then 25-year old Adam Lyons. The subject line: “Wanna disrupt the insurance industry?”
Did Cuban have a long history of experience with the insurance industry? Not much more than any frustrated consumer, buying coverage blindly because, well, we have to. Lyons’ business plan relied on technology and transparency, and provided drivers (now homeowners, as well) with visibility into what their rates would be from different providers.
Cuban bit the bait and invested in The Zebra (then called “The Insurance Zebra”). For the first time, auto insurance customers were empowered to make good choices with confidence they weren’t getting screwed. (Think pharmaceutical customers feel they can say the same?)
In this case, as with most of Mark Cuban’s investments, it was a smart idea that could make a profit while helping people. It also leveraged a passion of his as a disruption: transparency.
Give someone a deal, they become customers. Empower them with information, they become ambassadors. Solve a problem of theirs no one has cared enough to fix before? They become evangelists.
It makes sense that Cuban would take the same approach when considering a move into the pharmaceutical industry.
We hear you- the four of you saying we have enough accountability in the pharmaceutical industry. “After all, look what happened to Martin Shkreli!” If that is our bar, we’re in trouble, and so are the people we are in business to serve.
A lot goes into pricing. We get that. And some things are just expensive, with no way around it. But are you sure, beyond a shadow of a doubt, that the prescription medications you know, sell, and rely on are priced fairly?
But, But, But… at Least Generic Medications Are Already Priced Fairly… Right?
Well, we’re really not sure. Are generic drug manufacturers pricing their products ethically? Can we prove it, line by line in their cost justification? How can we expect customers to know and trust this if we lack transparency within our own industry?
Even within the one company you work for, you probably know pricing if you work in pricing and forecasting. Otherwise, you don’t learn your product’s price until the last possible second. It is kept so hush-hush so competition doesn’t find out and because pricing in the pharmaceutical industry is so misunderstood by the public that we don’t want to be open to attacks before we even get a chance to try and help anyone.
There are other reasons we are steered away from thinking or talking about price. If the cost of a medication is a barrier that comes up, we want our reps pivoting to talk about the science. We have tons of education about the science. We are never empowered to talk about the price, largely because we don’t want doctors over focused on price; we want our very rare time with them to be focused on how it actually helps patients.
It would be nice to have the ability to proudly state all the work and justifications for the expense- even in just one sentence. However, it’s always been frowned upon.
The only people who talk about price are the ones with the price advantage. They sell on price, but all they say about the price is that it’s lower. That’s still not real transparency.
The result is this feeling the public has of being personally victimized by Regina George the pharmaceutical industry. We fear what we don’t know. Without arming the public with education and information about our pricing, we have left them to create narratives from the scary scraps they dig up on the internet- some of which are true, but most of which do not paint an accurate picture of pharmaceutical pricing strategies.
Scared people are angry people, and angry people, left defenseless, go on the offensive.
Who in the pharmaceutical industry hasn’t heard the horror stories of terrifying (albeit creative) protestors?
Gilead Sciences had a booth at a conference once that was wrapped in yellow caution tape by protestors labeling them as killers. The protestors were so aggressive that they posed a physical threat, and sales reps were ushered to a “safe room.” Gilead refused to publicly respond.
The protestors took it to the next level. They gathered outside of their corporate office dressed as dead people, carrying ten-foot long coffins on their heads. No response from Gilead. No explanation for the pricing the protestors were objecting to.
Since they didn’t hear from Gilead, the protestors figured they’d share their message with “the people on the street.” In this case, that meant entering the lobby of a big high rise in central London, lining up against the window facing the street, and dropping their pants.
On their exposed rear ends, a message about price gouging was spelled out, one letter per cheek. Creative, even kind of funny, but inflammatory and uninformed to say the least.
And maybe it’s our fault that they were uninformed.
Mark Cuban’s Cost Plus Drug Company has committed publicly to sharing every cost that goes into making every pill. If the rest of us did the same, what’s the worst that could happen? What are we really afraid of?
Pharmaceutical industry professionals, especially within generic drug manufacturing, are ducking for cover, hoping they’ll have enough time to strategize and adapt before Cost Plus Drugs comes for them.
Although he has an aggressive goal of offering over 100 different generic medications by the end of the year, albendazole is the first. This is an anti-parasitic medication that is presently listed for up to $400 or more per tablet. Cuban plans to bring this price down to $13 cost, $15 wholesale, and $20 suggested retail.
What might be next? It could be another orphan drug in the rare disease market, or it could be that he does go for volume- something popular, but currently very expensive.
GoodRX shared these two blogs about expensive drugs you may want to check out:
– Top 10 Most Expensive Popular Generic Drugs in the U.S. (and How to Save)
He could also focus on an underserved and stigmatized sector: mental health. Generic drugs for the treatment of mental health issues are vital for those who take them and rely on them to function.
We’ll be watching, and updating this article and the SOURCE EXPLORER website as news is released.
While most Americans have reason to cheer him on, generic drug manufacturers are buzzing nervously more than anyone else in the pharmaceutical industry right now. A 20% reduction in MSRP from new drugs is pretty standard, and they have built their businesses around that expectation. If just anyone can come in and undercut that price by leaps and bounds, it’s going to cause a major disruption.
We’re on the lookout for comments or industry responses from companies who manufacture generic drugs, such as Mylan (now part of Viatris), Actavis (now part of Teva), Sandoz (a division of Novartis), Sun Pharma, Par Pharmaceuticals (an Endo International plc company) ,Lupin, Hospira (now part of Pfizer), and Dr. Reddy’s.
It’ll also be interesting to see the response from others who have already been innovating in the pharmaceutical industry, such as GoodRX.
GoodRX doesn’t make the bulk of its money from its customers. It’s built to provide them with transparency, aggregating and sorting the cost of both brand-name and generic drug prescriptions according to price or location. If a pharmacy across the street from yours is offering your prescription at 50% less with a GoodRX code, that’s a no-brainer.
While GoodRX generates some revenue from premium subscriptions, they make most of their money from advertisers and through referral fees, as clearly stated on their site (more transparency FTW). The danger to them here is that there won’t be as much of a savings to offer people if the cost of generic drugs comes down industry-wide to compete with Cost Plus Drugs.
Sure, it’s possible that Mark Cuban is considering a political run, and this venture will support his platform. It’s been posited by many who hear of his “sudden” interest in the healthcare of the populus. He has pretty strong opinions, though no particular party has earned his outright commitment. Cuban is more about the ideas than their labels. On some of his positions, he has said, “Whether that’s progressive or conservative, I don’t know or care.”
We can learn something from that stance when we gossip about his “agenda.” We don’t really know, but we don’t have to care. When a disruption is warranted, it should be welcomed, no matter what its source.
At the very least, it doesn’t seem like Mark Cuban is in it to beat us. He has decided to join us, albeit on his terms. The more we learn, the more it feels like his terms should be ours, as well
Anything else the pharmaceutical industry can learn from Mark Cuban? Here are some of his own words from a blog he wrote in 2019:
“As in every business you have to always ask yourself what your product is and the best way to deliver it.”
In leading the Dallas Mavericks organization to earn the fierce brand loyalty of its fans and neighbors, Cuban recognized first that they were not in the business of basketball. They were in the business of providing special and meaningful experiences for fans and the Dallas community.
Let’s play along. What business are we in? What business does Mark Cuban believe he’s entering? Are they the same?
If successful, Cuban will raise the bar for the entire pharmaceutical industry in providing transparency, accountability, and greater access to our customers.
While it is the focus of this article, Mark Cuban Cost Plus Drug Company Pharmaceutical, pbc is not the first or only disruptor to watch within the pharmaceutical industry. We’ve mentioned GoodRX, which is in the business of empowering customers to save money on meds. They do have other services, but this is what we know them best for.
We should also be watching Pill Pack by Amazon Pharmacy, which is in the business of convenience, like everything else at Amazon. Though Jeff Bezos has announced his plans to step down as CEO to focus more on his other passions, he has already established Amazon as the leader in getting people what they want and need when they want and need it. His successor as CEO, Andy Jassy, is well aware of the Bezos advantage and plans to extend that legacy.
In case you hadn’t noticed, Amazon also has their own line of generic OTC (over-the-counter) medications, Amazon Basic Care. Could they be the next to compete on generic prescription drugs?
As we look to the future, it will be interesting to see how much the pharmaceutical industry has been opened up to more disruptors from different industries. Will the pharmaceutical industry veterans be more successful due to their experience? Or, will the new entrants change the face of the industry like Mark Zuckerberg did with social media?
If the pharmaceutical industry is to adapt, thrive, and help people better, we need to be open to hearing from our critics as well as from our disruptors. Sometimes it takes an outsider to second-guess “the way we’ve always done it.”
“What could an outsider possibly see that we don’t?”
Let’s find out.
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