The US government could save taxpayers $3.6 billion if it used Mark Cuban's low-cost online pharmacy for generic drugs, study says

• The federal government spends over $115 billion per year on prescription drugs through Medicare.
• The program spent $9.6 billion in 2020 on 89 generics that are now available from Mark Cuban's low-cost pharmacy.

If the US government were to begin using billionaire investor Mark Cuban's low-cost pharmacy to buy generic drugs for Medicare, the savings would be huge.

According to a new study published this week in the Annals of Internal Medicine, if the service were around in 2020, and if the government had bought 89 of the prescription drugs available on the site, it would have saved at least $3.6 billion.

That's more than a third of the $9.6 billion spent on that initial set of drugs in 2020, and the list of medications has already tripled since CostPlusDrugs.com went live earlier this year.

Cuban told Insider he was not surprised by the study's findings, since Medicare pricing is public information.

For an industry that only seems to grow in complexity each year, the Cost Plus concept is astonishingly simple: a 15% markup, a $3 dispensing fee, and a $5 shipping fee (or $15 for expedited service).

The service also doesn't accept insurance, which poses a bit of a problem for Medicare, since federal law prohibits the government from purchasing drugs directly for Part D participants.

"It's clear Medicare is overpaying for some generic drugs, and that they could save billions," lead study author Dr. Hussain Lalani told The Wall Street Journal. "There are some serious inefficiencies in the pharmaceutical supply chain."

Dr. Lalani is a primary care physician at Brigham and Women's Hospital and Harvard Medical School fellow, while two of his co-authors disclosed financial support from Arnold Ventures, a philanthropic organization focused on combatting high drug prices.

The highest aggregate savings found in the study were $293 million on an acid-reflux prevention medication called esomeprazole, which is available under Medicare for $160 per 90 tablets, but costs just $17 for the same quantity on Cuban's site. Even Costco members pay 43% less than Medicare does for generic prescriptions, a prior study found.

The second highest aggregate savings was $241 million from the cholesterol treatment rosuvastatin, which costs half as much on Cuban's site as Medicare pays through Part D.

Cuban told Insider the company wanted to find the medicines that had the greatest impact, and that the initial offering came down to what his team could convince manufacturers and distributors to sell.

Americans spend about $365 billion on prescription drugs each year, and Medicare is responsible for almost a third of that, or $115.6 billion. Within Medicare, generic drugs represent about $23 billion.

Analysis of the industry found that 64 cents of every dollar spent on generic drugs is absorbed by the supply chain that moves medications from manufacturers to patients, with half of that markup taken by pharmacies like CVS and Walgreens.