Mark Cuban, the billionaire entrepreneur and “Shark Tank” alumnus who started Mark Cuban Cost Plus Drugs, told senators on Wednesday that he thinks price transparency is critical to helping employers bring down the cost of health benefits.
But Cuban said his Dallas-based online discount pharmacy is using its deep knowledge of health care pricing and contract terms to handle the shopping, rather than asking the company’s 70 employees and other health plan participants to shop for care.
For what outsiders might call the Cubancare plan, and what Cuban calls the “Cost Plus Wellness” program, the firm has been negotiating contracts directly with Texas providers.
The program will soon publish the provider contracts as well as the prices it pays for care, Cuban said.
“When we talk about transparency, it’s one thing to talk about prices, but most companies don’t have the sophistication to understand the contractual details,” Cuban said. We’ll publish them for anybody to copy.”
Cuban spoke at a hearing in Washington on making health care services more “shoppable” that was organized by the Senate Special Committee on Aging.
The committee streamed the hearing live online and posted a recording on its website.
What it means: If Cuban’s Cost Plus Wellness program succeeds, it could push other plans and provider network managers to post their provider contracts.
The Cubancare strategy: The Cost Plus program gets good deals by offering to pay the providers cash up front, with no deductibles and no prior authorization requirements, Cuban said.
Plan participants who see a provider with a plan contract have no out-of-pocket costs, he said.
High deductibles: Cuban said he had talked to many chief executive officers and chief financial officers of hospital companies while developing the Cost Plus Wellness program.
“I found out where the insurance companies were taking advantage of them,” Cuban said.
The insurers “underpay their contracted rate with high deductibles,” he added.
When a patient comes in with a high deductible, the hospital has to try to collect big payments directly from the patient, and “you turn the hospital into a subprime lender,” Cuban said.
TrumpRx: Cuban also talked about the Cost Plus Pharmacy’s high-profile effort to share its drug price lists with the federal government’s new TrumpRx.gov project.
TrumpRx.gov is supposed to help patients get low prices on drugs by buying the drugs directly from the manufacturers.
The TrumpRx.gov efforts and the effort to negotiate for “most favored nation” pricing for prescription drugs, or to get the lowest available prices for people in Medicaid plans and low prices for other U.S. patients, should help weaken the role the big pharmacy benefit managers play in increasing the cost of prescription drugs, Cuban said.
The big PBMs argue that they use complicated, sometimes confidential strategies to try to cope with the big drug manufacturers’ sky-high prices and tough negotiating strategies.
Cuban has argued that the PBMs’ strategies, such as contract terms that base part of the PBMs’ pay on the size of the drug price discounts that the PBMs achieve, have tended to increase the cost of prescription drugs in the United States.
The new TrumpRx.gov and most-favored-nation pricing initiatives “allow manufacturers to work around the PBMs and sell directly to the patients,” Cuban said. “It’ll save everybody a lot of money.”
One example of the power of direct-to-consumer sales programs is the fact that the popular GLP-1 agonist drugs tend to cost employer plans an average of about $1,300 per month, but consumers buying the drugs directly online only about $499 per month or less, Cuban said.
Reference-based pricing: Another hearing witness, Don Moulds, the chief health director at the California Public Employees’ Retirement System, talked about his huge organization’s efforts to set up a “reference-based pricing” program for the 1.5 million CalPERS health plan participants.
In a reference-based pricing program, a plan names the price it’s willing to pay health care providers for a product or service and works with the providers willing to pay its price, rather than trying to negotiate with the providers to lower their prices.
The CalPERS reference-based price program affects plan participants’ use of medical lab tests and use of common procedures such as colonoscopies and cataract surgeries.
The prices and patients’ out-of-pocket cost levels are designed to encourage eligible patients to get the procedures done in outpatient settings rather than in inpatient hospital settings, Moulds said.
The program has cut the costs of the lab tests by about 4% and the cost of the other procedures involved by about 20%, Moulds said.
But Moulds emphasized that employers have to go into reference-based pricing programs with realistic expectations.
“Reference-based pricing has shown promise,” Moulds said. “But it does have its limits.”
The programs tend to cut a plan’s costs by only about 5% of the total cost of care, partly because only a relatively small percentage of care is readily shoppable, Moulds said.
Price transparency: Some health care antitrust experts have argued that focusing too much on price disclosure can end up helping sellers team up to increase prices more than it helps shoppers negotiate for better deals.
Researchers found, for example, that the net out-of-pocket cost for patients who use the Mark Cuban pharmacy to buy generic drugs used to treat neurological conditions is often higher than what the patients would pay if they simply used their health insurance to pay for the same drugs at a brick-and-mortar drug store.
But many patient advocacy organizations and other organizations continue to promote price transparency as an important defense against high and seemingly arbitrary health care prices.