A billionaire wants to disrupt the US drug market

Ithere is One thing guaranteed to catch the attention of Americans is cheap Viagra. On June 2, a company owned by Mark Cuban, a billionaire investor (as well as a judge from “Shark Tank”, a TV show for budding entrepreneurs and owner of a NBA basketball team), caused a stir by slashing the price of the blue pill, whose patent expired two years ago, from several dollars to 11 cents. It was one of 87 drugs that the Mark Cuban Cost Plus Drug Company added to its growing assortment of inexpensive off-patent drugs. A new study finds that Mr. Cuban’s prices could have saved Medicare, a federal health plan for the elderly, $3.6 billion on $9.6 billion in drugs he purchased in 2020 .

Drugs in America are notoriously expensive. In 2019, spending on prescription drugs was $1,126 per citizen, double the figure in other wealthy countries (see chart). Critics like Mr. Cuban seek to shake things up. It intends to offer thousands of cheaper drugs by the end of the year. His company buys them directly from manufacturers and sells them to consumers at cost, plus a 15% markup and a $3 pharmacy fee. The idea is to make drugs affordable for the 31 million Americans who don’t have health insurance and the many others whose policies charge high fees for prescriptions. Patients have thanked him on social media for reducing the cost of drugs to treat conditions ranging from heartburn to cancer.

Mr. Cuban is not the only one who has lost patience with America’s current setup. CivicaScript, of Lehi, Utah, is also trying to bring down the price of generics. In March, it announced it would make generic insulin for up to $30 a bottle, up from $300 for branded versions today. At the same time, on the innovative and patented side of the market, eqrx and Checkpoint Therapeutics are developing new cancer and immunology drugs with the explicit intention of reducing the costs of expensive existing therapies from big pharma.

Price competition seems like an obvious thing to try in the overpriced US drug market. The absence of such competition suggests that obstacles stand in the way.

Some of them are practical. Some off-patent drugs take years to copy, manufacture, test and gain regulatory approval. Insulin, a complicated biological molecule, is one of them. Having borne the cost of copying and certifying its insulin, CivicaScript may find that licensees, who have long recouped their development costs, simply lower the price of their branded products to lower it instead. CivicaScript boss Ned McCoy insists that would make him happy; the company’s goal, he says, is to bring change to the marketplace. The company is incorporated as a public benefit corporation which does not seek profit but rather a “positive impact on society”. But he can’t do that if he goes bankrupt.

In the US patent drug market, the inventor of the drug has great pricing power, which has driven prices up. Developing new therapies is an expensive glove of research, clinical trials and regulatory hurdles. Too often it ends in failure. The risks can be reduced by choosing well-known diseases. However, to be successful over the long term, eqrx will have to catch up in volume what it gives up on the margins, observes Daniel Chancellor of Informa Pharma Intelligence, a research firm. The same goes for others who choose this model, such as Checkpoint. The British government has indicated that it will make large-scale purchases from eqrxpipeline of anti-cancer drugs if these obtain regulatory approval. While it won’t help US patients in the short term, it’s good news for the company if it helps increase production.

The final difficulty is that any drug seller who undermines incumbents becomes a target of acquisition by them. It’s easy to imagine a pharmaceutical giant launching a takeover bid on the company and, if successful, simply raising prices until the market can bear it – which in America is a lot more than that. that eqrx wants to load. After buying a biotech startup that had developed a hepatitis drug in 2011, a major drugmaker, Gilead, charged far more for the treatment than its target had bargained for.

On June 13, Goldman Sachs, an investment bank, noted that the market was undervaluing drugs developed by eqrX. Regarding the acquisition, eqrx boss Melanie Nallichéri remarks cryptically that the company has thought about how to “not let this happen”, but declines to elaborate. Mr. Cuban shares the sentiment: “I have no reason to sell…I can afford to absorb the losses associated with starting the business. CivicaScript has also made an unattractive investment in itself by handing over control of much of what it can do to a second nonprofit sister company, Civica. The poison pill, it seems, has its place in the pharmaceutical industry.

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