Mark Cuban’s announcement over the weekend of an online pharmacy selling over a hundred generic drugs at near cost was totally unexpected but will likely be welcomed by millions who struggle to afford medication. The billionaire told TechCrunch that the business model is refreshingly simple: “Lower pricing reduces patient stress, and that will lead to more customers.”
The Cost Plus Drug Company aims very simply to provide as many common medications as possible in generic form at as low a price as possible. All cash, no IP deals, no insurance companies — just buy pills for what they cost to make, plus 15 percent to cover overhead.
Asked about ROI, Cuban admitted there isn’t much to speak of, by design.
“I want to be above break even while maximizing the number of people who can afford their medications,” he said. “Shoot. I would be happy if we can make a little, but push pricing of generics sold elsewhere down significantly.”
“Our challenge is to keep pushing prices lower,” not compete with anyone, he continued. “Our KPI is how much we can reduce the stress of our patients who buy generic meds. When people save a lot of money on their medications, they often will tell others they know that have the same challenges. That word of mouth impacts our growth the most.”
The company currently offers generic versions of medications for everything from migraines to HIV to birth control, but there’s no particular priority to the ones on the list except that they can and should be offered cheaper, explained Cuban. There’s no board deciding which conditions are next on the list or anything like that.
“As far as the process, we choose drugs that we can offer at a price that is lower than what is out there already,” he said simply. “It’s like any business.”
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The ultra-straightforward business plan of undercutting middle men and offering a proven product for a better price than anyone else seems almost quaint today, but Cuban knows what he’s doing — in a generic way, at least. Asked what advice he had for any startups looking to get into the online pharmacy space, he offered a virtual shrug: “I don’t have any. I’m still learning.”
