What does that mean?
That’s because insurance companies, no matter where they are, use PBMs, or pharmacy benefit managers. The PBM negotiated reimbursement rates with the pharmacy. However, they basically said, “This is what we’re going to reimburse you for.” (His Apple Watch rang.)
Go ahead and check it out.
It’s my son. (Speaking to the clock.) I will have a late lunch. Don’t worry. Please enjoy. (Back to interview) He plays basketball.
Nice.
Therefore, there is no negotiation in a PBM. Especially for small independent pharmacies, it’s take it or leave it. And, “Oh, by the way, you’re not allowed to have any say in this contract.” period. The first rule of medical contracts is to not talk about medical contracts. Therefore, pharmacies can lose $20 to $30 on every branded subscription instead of breaking even. The idea is to cover it with things like toilet paper. Well, that doesn’t work.
And what about pharmaceutical manufacturers?
PBMs also negotiate with manufacturers, but they still lose. They have no idea who is using their medication, what the demographics are, what the compliance is like, etc. PBMs would then offer to perform the analysis on their behalf, and then sell access to their drug data to manufacturers.
Then the PBM industry group said, “Look at the bad guys!” It’s very complex and opaque.
(PBMs have a proven track record of ensuring patients save money on prescription drugs, Greg Lopez, a spokesperson for the Pharmaceutical Care Management Association, an industry group, told WIRED.) He added that pharmaceutical companies are “solely responsible for setting and procuring prescription drug prices.”
OK, now we know how these organizations buy up drugs and control the market. Why didn’t you, a billionaire, take that approach with other drugs? Why didn’t you say you’d buy all the insulin in America?
Now, we looked into the production of insulin. We developed our own glargine (synthetic) insulin and spent over $5 million, which I don’t even know. But that’s exactly when Biden confirmed that his Medicare plan would cover co-pays for insulin up to $35. So it didn’t make sense to do it at that point.
You told Texas Monthly that you don’t care if you don’t make a lot of money doing this. Is that still true?
I want to be able to be independent. I don’t want to continue to provide subsidies. But I don’t need to make money.
Do you think Cost Plus Drugs is altruistic?
No, I think it’s very impactful and fun. Altruism is: Give me money, da-da-da-da. “It’s fun to disrupt an industry that everyone hates.” Every other week, if not every week, I started getting emails and letters saying, “Oh my god, Grandma is alive!” Someone once said to me, “You saved me $15,000 a year in chemotherapy costs. Without you, I would have died.”
Photo: Michel Grosskopf
What’s interesting is, I’m not going to say midlife crisis, but it seems like you’re at least thinking about your legacy now.
But when I was 25 years old and this opportunity arose…
