What do you mean by that?
Because your insurance company, whoever it is, uses a PBM, a pharmacy benefit manager. The PBM negotiated with a pharmacy the reimbursement rate. Except they basically said, “This is what we're going to reimburse you for.” [His Apple Watch buzzes.]
You can check that for yourself.
It's my son. [Speaking into watch.] We're having a late lunch. Don't worry. Go ahead and enjoy. [Back to the interview.] He plays basketball.
Nice.
So with the PBMs, there’s no negotiation. Especially with the small independent pharmacies, it’s take it or leave it. And, “Oh, by the way, you can’t say anything about this contract.” Period. The number one rule of healthcare contracts is you don’t talk about healthcare contracts. So instead of breaking even, the pharmacy loses $20 to $30 on every branded subscription they take out. The idea is that they’ll make up for it with toilet paper and other things. Well, that doesn’t work.
And the drug manufacturer?
The PBMs are also negotiating with the manufacturers, but they lose too. They have no idea who is taking their drugs, what the demographics are, what the adherence is. So the PBM will offer to do the analysis for them, and then to sell gives the manufacturer access to the data of its own medicine.
Then the PBM trade association says: “Look at the bad guys!” It's so complicated and opaque.
[Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, a trade group, told WIRED, “PBMs have a proven track record of securing savings on prescription drugs for patients.” He added that drug companies “are solely responsible for setting and raising prescription drug prices.”]
Okay, so you saw these entities buying up drugs and controlling the market. Why didn't you, a billionaire, use that approach with other drugs? Why didn't you say, I'm going to buy all the insulin in America?
Well, we looked at insulin production. We developed our own glargine [synthetic] insulin, and I spent $5 million or more, I don't even know. But that was right when Biden made Medicare plans cover insulin for a $35 copay. So it didn't make sense to do it at that point.
You told Texas Monthly that you don’t care if you don’t make a fortune. Is that still true?
I want to make it so that it is self-sufficient. I don't want to subsidize it all the time. But I don't need to make money from it either.
Do you consider Cost Plus Drugs altruistic?
No. I see it as fun with a huge impact. Altruism is like, “Great, I feel good because I'm helping people. I gave money and da-da-da-da-da.” Disrupting an industry that everyone hates, that's pleasure. I get emails and letters, if not every week, then every two weeks, saying, “Oh my God, my grandma is alive.” I just got a note from someone who said, “You saved me $15,000 a year on my cancer medication. I would be dead if it wasn't for you.”
Photo: Michelle Groskopf
The interesting thing is that it seems like you are at least thinking about your legacy now. I'm not going to say you're in a midlife crisis.
But if I was 25 and this opportunity came up…
