Cost Plus Drug Business Model

The Mark Cuban Cost Plus Drug Company is an online prescription medication service that was founded by American billionaire entrepreneur Mark Cuban.

The service is essentially an online pharmacy where customers can purchase numerous medications at a drastically reduced (and more transparent) price. Cuban started the company because of the exorbitant cost of some prescription medication in the United States, where almost 30% of adults do not take their pills because they are unaffordable.

According to Business Insider, consumers can save almost $3,000 on the cost of a generic leukemia medication and over $1,000 on a similarly generic HIV treatment by ordering from Cost Plus Drug. The service also offers medication for diabetes, heart health, mental health, gastrointestinal disorders, and high blood pressure.

What is the Cost Plus Drug business model?

The Cost Plus Drug business model involves selling generic medication at 15% above wholesale price. Generic medications have the same active ingredients as their brand-name equivalents, which are more expensive but nevertheless remain the preferred option for consumers.

In any case, Cost Plus Drug is a more convenient option that allows consumers to order medication online and have it delivered to their homes. While the company’s technology is certainly not unique, it does have one advantage over its competitors.

Cost Plus Drug has its own pharmacy benefits manager (PBM), which is usually a third-party that liaises with pharmacies and drug manufacturers to negotiate a better price for consumers. Instead of paying a PBM, Cuban’s company negotiates directly with the pharmaceutical company and cuts its costs in the process. These savings are then passed to consumers with just enough product markup for the company to remain viable.

Cuban is not the first entrepreneur to tackle the prohibitive cost of prescription medication in the United States, with start-ups such as GoodRx, Capsule Pharmacy, and Blink Health also reducing costs in various ways. However, Cost Plus Drug may be able to disrupt the industry with its affordable and transparent prices, ease of use, and the ability to cut out the middleman. 

Moving forward, there is potential for Cost Plus Drug to scale its online business model and offer a greater diversity of medication to an ever broader audience.

Key takeaways:

  • The Mark Cuban Cost Plus Drug Company is an online prescription medication service that was founded by American billionaire entrepreneur Mark Cuban. The online pharmacy sells various numerous medications at a drastically reduced price.
  • The Cost Plus Drug business model involves selling generic medication at 15% above wholesale price. Generic medication is less expensive than brand-name medication but has the same active ingredients.
  • While the Cost Plus Drug business model is neither unique nor world-beating, the company does have an important competitive advantage in terms of price. It negotiates with pharmacies and drug manufacturers itself instead of employing a middleman, with these savings then passed to the consumer.

Read Next: How Does GoodRx Make Money.

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