Cost Plus Drugs Pricing Could Save Medicare $1.29 Billion
Author: Vanderbilt University Medical Center
Published: 11 Feb 2023 - Updated: 6 Oct 2026
Publication Details: Peer-Reviewed | Informative
Table of Contents:
Synopsis - Definition - Overview - FAQs - Insights, Updates - Related Content
Synopsis
This research, a peer-reviewed study published in The Journal of Urology and led by a team at Vanderbilt University Medical Center, compares what Medicare Part D actually spent in 2020 on nine widely prescribed generic urological drugs with what the same prescriptions would have cost under the pricing used by the Mark Cuban Cost Plus Drug Company. The researchers estimate that buying at those prices would have saved roughly $1.29 billion in a single year. The finding matters most to the people who fill these prescriptions month after month - older men with prostate conditions, people living with bladder dysfunction, and seniors and people with disabilities who rely on Medicare for drug coverage - and to the taxpayers who fund the program. It is useful because it rests on published federal spending data and a transparent, publicly posted price formula rather than on projections or marketing claims, giving patients and prescribers a concrete reason to compare a plan copay against a cash price before filling a generic prescription.*
At a Glance
- 1 - Under 90-day prescription pricing, every drug studied produced Medicare savings, ranging from 48.7% to 99.2%.
- 2 - Abiraterone alone accounted for $656 million of the projected savings, nearly 52% of the total for urological drugs.
- 3 - The pricing template used for comparison was the drug's manufacturing cost plus a 15% markup, with flat fees of $5 for dispensing and $3 for shipping.
- 4 - The drugs analyzed were tamsulosin, finasteride, oxybutynin, alfuzosin, solifenacin, tolterodine, sildenafil, tadalafil and abiraterone. They treat prostate cancer, overactive bladder and prostate enlargement.
Topic Definition
- Cost-Plus Drug Pricing
Cost-plus drug pricing is a way of setting the retail price of a medication by starting with what the seller actually paid for it and adding a fixed, disclosed markup along with set fees for pharmacy handling and shipping. Unlike conventional pharmacy pricing, where the amount charged depends on confidential contracts among manufacturers, pharmacy benefit managers, insurers and pharmacies, a cost-plus price is the same for every customer and can be traced back to its parts. The Mark Cuban Cost Plus Drug Company, a public benefit corporation based in Dallas, Texas, applied the approach to an online pharmacy in 2022, selling mostly generic drugs at its acquisition cost plus a 15% markup and flat fees. The model has since been used by researchers as a benchmark for estimating how much public programs such as Medicare overpay for common generic medications.
Overview
Urological Drug Price Stewardship: Potential Cost Savings Based on the Mark Cuban Cost Plus Drug Company Model - The Journal of Urology.
A drug company co-founded by entrepreneur Mark Cuban could save patients $1.29 billion a year based on 2020 Medicare Part D expenditures on just the nine most popular urological drugs, according to a study published in the Journal of Urology.
The study, led by Vanderbilt University Medical Center (VUMC) researchers, examined the potential savings if Medicare prices for generic drugs were as low as those offered under the Mark Cuban Cost Plus Drug Company, which provides a standard template pricing of the cost of manufacturing the drug plus a 15% markup, plus standard $5 fees for dispensing and $3 fees for shipping.
"We found that if the U.S. government used Mark Cuban's cost-plus drug pricing model to supply urological drugs to Medicare patients, they would save taxpayers an estimated $1.29 billion," said lead author Ruchika Talwar, MD, a fellow in Urologic Oncology at VUMC.
"It means that patients would be able to get their drugs more affordably, but also means that taxpayer funds could go toward other important issues and hopefully save us all some money in general."
The nine commonly prescribed urological drugs studied - tamsulosin, finasteride, oxybutynin, alfuzosin, solifenacin, tolterodine, sildenafil, tadalafil, and abiraterone - are used to treat conditions including prostate cancer, overactive bladder, and prostate enlargement.
For the 90-day prescription prices, all drugs generated cost savings for Medicare, ranging from 48.7% to 99.2%. The savings for abiraterone alone amounted to $656 million, or nearly 52% of all potential Medicare savings for urological drugs in both 30-day and 90-day prescription models. Abiraterone is used to treat prostate cancer that has spread to other parts of the body by blocking testosterone, which is the hormone that drives prostate cancer growth.
"Just by changing the way one commonly prescribed drug (abiraterone) was purchased, we could convey a benefit of more than $650 million in cost savings to taxpayers," Talwar said. "The impact of this could be astronomical across all cancers ... any sort of oral, generic drug available through Mark Cuban's company can be much cheaper for many patients, not just Medicare patients, through this program. And taxpayers are the ones who fund Medicare drug spending."
"When Dr. Talwar approached me to move this project forward, I had little idea of its possible impact," said co-author Sam S. Chang, MD, MBA, Patricia and Rodes Hart Endowed Professor of Urologic Surgery and VUMC Chief Surgical Officer, Vanderbilt Ingram Cancer Center.
"Dr. Talwar's interest, investigation, and efforts have gained national attention and increased the need for policy initiatives to decrease medical costs. Under her leadership, the team's future work outlines the financial burden of common cancer therapies on our patients and the possible next steps forward," he said.
Resources That Provide Relevant Related Information
- Mark Cuban's Cost Plus Drug Company Could Save Taxpayers Millions
- Cost Plus Drugs: Lowest Prices on Lifesaving Prescriptions
Frequently Asked Questions
NOTE: Researched FAQs by Disabled World (DW)
Do you need a prescription to order from Cost Plus Drugs?
Yes. Prescription medications require a valid prescription from a licensed U.S. prescriber, who sends it electronically to the company's partner pharmacy after you create an account. Refills and transfers of existing prescriptions are also handled through your prescriber.
Does Cost Plus Drugs accept health insurance?
The company was built around cash prices that do not depend on insurance, and many customers simply pay the listed price. It has since added arrangements with some health plans and pharmacy benefit managers, so check whether your plan participates before ordering.
Can people on Medicare Part D buy from Cost Plus Drugs?
Yes, anyone with a valid prescription can pay the cash price, including Medicare beneficiaries. Money spent outside your Part D plan generally does not count toward your deductible or annual out-of-pocket limit unless your plan processes the claim, so compare both options first.
What is a pharmacy benefit manager?
A pharmacy benefit manager, or PBM, is a company that administers prescription drug benefits for insurers, employers and Medicare drug plans. PBMs negotiate prices and rebates, set formularies and pay pharmacies, and critics say this layer can raise what plans and patients pay for some generics.
Why would Medicare pay more than a cash pharmacy for the same generic drug?
Medicare Part D is run through private plans, and each plan's price reflects contracts among the plan, its PBM and pharmacies rather than the drug's manufacturing cost. Those negotiated rates can sit well above the acquisition cost, which is the gap the cost-plus model exposes.
Are generic drugs as safe and effective as brand-name drugs?
Yes. The FDA requires a generic to have the same active ingredient, strength, dosage form and route of administration as the brand-name drug and to be bioequivalent to it. Inactive ingredients, shape and color may differ.
How is cost-plus pricing different from Medicare drug price negotiation?
Cost-plus pricing is a retail formula a pharmacy applies to every drug it sells. Medicare negotiation, created by the Inflation Reduction Act of 2022, lets the federal government negotiate prices for a limited list of high-cost brand-name drugs without generic competition, with the first negotiated prices taking effect in 2026.
What other programs can lower prescription costs for seniors and people with disabilities?
The Medicare Extra Help program, also called the Low-Income Subsidy, reduces Part D premiums and copays for people with limited income and resources. State pharmaceutical assistance programs, manufacturer patient assistance programs and 90-day mail-order supplies can also cut costs.
Insights, Analysis, and Developments
Editorial Note: What stands out in this analysis is how little of the gap has to do with the medicines themselves. These are old, off-patent generics, cheap to make, and the difference between what Medicare paid and what a cash pharmacy charges comes down to how the purchase is routed and who takes a cut along the way. Lead author Ruchika Talwar, MD, points out that the same logic would apply to oral generics well beyond urology, cancer drugs included, and that people outside Medicare can use the same pricing today. It is worth keeping the limits in view - this is a modeled estimate built on one year of spending, Medicare does not buy drugs this way, and a cash purchase may not count toward a plan deductible. Still, for anyone on a fixed income who has been quietly splitting pills or skipping refills, the practical takeaway is simple: ask what the cash price is before assuming the insurance price is the lowest one available.*
Attribution/Source(s): This peer reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by Vanderbilt University Medical Center and published on 11 Feb 2023, this content may have been edited for style, clarity, or brevity.
* Editorial additions by Ian C. Langtree.