Mark Cuban-owned company launches pharmacy-benefit manager

The aim of the new pharmacy-benefit managers was to be more transparent about drug costs

A pair of new companies are being launched to tackle high drug costs, the latest sign of employer frustration with the middlemen, known as PBMs, whose job it is to keep down the spending.

The Mark Cuban Cost Plus Drug Company PBC and the Purchaser Business Group on Health, a nonprofit coalition of nearly 40 large public and private employers, said they are each starting new pharmacy-benefit management companies.

PBMs work on behalf of employers, labor unions and governments to decide which drugs are available to patients, negotiate rebates on the prices paid for those drugs and process payments to pharmacies. The PBMs pass along much of the savings to their customers. Yet some employers have criticized PBMs for failing to disclose all the rebates and keeping too much of the savings.

The aim of the new pharmacy-benefit managers, their executives said, was to be more transparent about drug costs and share with their clients more of any negotiated savings.

"Pharmacy costs for both public and private purchasers have been the leading cost driver…and the traditional PBMs were simply unresponsive to their concerns," said Elizabeth Mitchell, chief executive of PBGH.


Mr. Cuban, the billionaire investor and owner of the Dallas Mavericks, is funding the new company with the aim of selling generic drugs at a transparent fixed-rate markup. To do so, it is creating an all-in-one pharmaceutical supplier, combining manufacturing, wholesale distribution, and pharmacy services under one roof.

Mr. Cuban said in an email that he agreed to fund the company after receiving a cold email pitch about three years ago from radiologist Alex Oshmyansky, who is now the company’s CEO.

FILE - In tis Feb. 26, 2018, file photo, Dallas Mavericks owner Mark Cuban stands on stage before an NBA basketball press conference in Dallas. Cuban has agreed to contribute $10 million to women’s causes and domestic violence awareness as par

In recent years, employers have become more interested in doing business with PBMs promising to be more transparent. Some large companies have opted to keep most of their business with a big PBM, but to move a small chunk of their workforce in a particular region to a transparent PBM as a pilot program to see how it performs, said David Dross, drug pricing and policy leader at Mercer, a consulting unit of Marsh & McLennan Cos.

"There’s plenty of employers who really want to see a new model and are pushing toward transparent arrangements," said Mr. Dross.

Transparency in the PBM industry typically means charging a flat fee for services and passing along to the employer 100% of the rebates and discounts paid by drugmakers to the PBM.


Nearly 80% of U.S. prescriptions are managed by three PBMs: CVS Health Corp.’s CVS Caremark, Cigna Corp.’s Express Scripts and UnitedHealth Group Inc.’s OptumRx.

Winning customers away from incumbent PBMs won’t be easy, said Scott Martin, founder of Remedy Analytics, a consulting firm owned by Brown & Brown Inc. that uses prescription-claims data to advise employers in negotiating with PBMs. As much as employers say they want more transparency from their PBMs, finding the lowest-cost vendor is usually more important, he said.

"Once you go through the process we’ve created to uncover all the games that are being played, what you find is that the buying power of the big PBMs is beating that of the startup PBMs," said Mr. Martin. "They just don’t have the volume and price advantage."

Health themes. Background of a large group of assorted capsules, pills and blisters. Drug abuse.

PBMs have said that the rebates they negotiate are used by employers to keep down overall health insurance premiums and that they have long offered transparent contract arrangements in which all rebates are passed along to customers.

Several state attorneys general are probing PBM pricing and rebate practices, and federal officials are reviewing a new rule that would require rebates negotiated by PBMs go to reduce patients’ out-of-pocket costs in the federal Medicare health insurance program.


Mr. Cuban’s PBM will start bidding for clients next year and aims to be operational in 2023, said Dr. Oshmyansky, the CEO. The company will share details of its operating costs to clients and will share 100% of the rebates they receive from drugmakers, he said.

"The supply chain for distributing pharmaceuticals to patients is so cumbersome and broken," Dr. Oshmyansky said. "We decided the only way to get our drugs to the people who need them is to build a parallel supply chain where we have control of all the intermediary players and ensure the same level of transparency at every level."

Mr. Cuban’s company plans to soon launch an online pharmacy that will sell 100 of the most commonly prescribed generic medications. The pharmacy is buying drugs directly from generic manufacturers including Amneal Pharmaceuticals Inc., and will charge customers a 15% markup plus a $3 dispensing fee, said Dr. Oshmyansky.

Customer in pharmacy holding medicine bottle. Woman reading the label text about medical information or side effects in drug store. Patient shopping pills for migraine or flu. Vitamin or zinc tablets.

The company is building a plant in Dallas to manufacture certain drugs, and hopes to open the facility in September 2022, Dr. Oshmyansky said.

PBGH’s new PBM, EmsanaRx, will be housed under an independent for-profit company called Emsana Health. The PBM will start operating next year with a small number of regional medical centers with about 3,000 employees total, said Chief Executive Greg Baker.


Over the next few years, the PBM aims to win over clients such as Walmart Inc. and Boeing Co. that makeup PBGH’s membership.

It aims to negotiate rebates directly with drugmakers, and will allow its clients to examine invoices showing the dollar amounts it receives in rebates, Mr. Baker said.

The PBM intends to share 98.5% to 99% of the rebates with its clients, with the remainder going to cover administrative expenses, said Mr. Baker.