Introduction
Mark Cuban Cost Plus Drug Company (MCCPDC) operates under the name Cost Plus Drugs and aims to reduce the price of a specific group of drugs. The company’s main strategy is to reduce the price of generics or off-patented medications by eliminating costly intermediaries and a fundamentally different pricing strategy for the pharmaceutical industry (Lalani et al. 890). The organization proves that the level of intermediaries is responsible for the high markup. Cost Plus Drug offers a system where generic drugs are provided at the manufacturer’s price, including a 15% markup and a negligible service charge (Cortese et al. 309). Such a strategy creates tension between two opinions: on the one hand, Cost Plus Drug challenges corruption; on the other hand, the pharmaceutical industry does not consider corruption to be the cause of high prices. The pricing policy of Cost Plus Drug may pose a threat to the pharmaceutical industry.
Drugs’ Pricing
The pricing of pharmaceutical companies is not strictly regulated, so manufacturers and distributors are often free to raise prices on their desire. Pricing of drugs implies its uniqueness, demand and effectiveness, and also takes into account the external factor of competition (Gupta et al. 230). An important criterion for pricing a medicine is the cost of research and development. The state is making attempts to regulate pricing policy, and in 2022 the Inflation Reduction Act to change the situation with high prices was passed, which aims to reduce the cost of prescription drugs (Rodwin 755). However, the ultimate goal of pharmaceutical companies remains to maximize revenue. At the same time, it should be taken into account that generic drugs cost significantly less than patented drugs, since they do not require such a significant amount of funds for research, development and clinical trials. Cost Plus Drug took advantage of this opportunity to invest and provide affordable drugs to the public.
The Pharma Industry is Corrupt
Not only ordinary patients who do not know the peculiarities of drug pricing, but Cost Plus Drug also express an opinion about the corruption of the industry, which makes drugs unaffordable to the public. Congress, which does not take strict measures to regulate prices, and the FDA, which benefits from high prices can also be blamed on corruption. This view can be supported by the fact that pharmaceutical firms control and fund clinical trials (Mitchell et al. 359). Seeking to obtain marketing authorization for drugs can disrupt clinical trials for profit. Pharmaceutical companies’ revenues rise as drug prices increase, regardless of their intended or non-intended use. Thus, it can be concluded that the industry does not care about accessibility or security of the drugs if they are making a profit.
Suspicions of corruption may be heightened by the patent laws. Current patent laws are designed to protect pharmaceutical companies from competition, while tax incentives help boost profits (Hilary et al. 1003). These incentives were designed and implemented to encourage new research and the search for breakthrough drugs. However, current methods are not targeted at specific patents or drug industries, and may unwittingly contribute to corrupt enrichment. Because of such a relationship, people may think that the enrichment of pharmaceutical companies is beneficial to government agencies.
Finally, the main argument of the advocates of the corruption position of the pharmaceutical industry may be the example of Cost Plus Drug. Pricing is as transparent as possible and allows the buyer to understand what it is made of and what they pay for. The company honestly sets the markup for its services and has a mission to make medicines more affordable. Such a policy can make buyers not understand what prevents other manufacturers from creating an open pricing system, which raises suspicions of corruption. Uncertainty in pricing encourages customers to think that pharmaceutical companies are focused solely on increasing their own profits. The absence of truly regulating pricing laws confirms the suspicions that the state and state organizations are involved in the corrupt system. Faced with ever-increasing costs, patients are questioning whether drug development is such an expensive and rewarding investment.
High Prices of Drugs is not a Result of Corruption
Despite the arguments of opponents, government agencies, the FDA, Congress and the pharmaceutical industry as a whole do not agree that the entire system is corrupt. The high prices of medicines are primarily a consequence of the expensive process of developing them, conducting clinical trials and paying all the employees involved in this system (Gupta et al. 230). Another reason for price increases may be the lengthy procedure for patenting medicines. The main argument of supporters of this position is that the production and release of a drug is an expensive process, which consists of many factors that are difficult to influence.
The stable profit of pharmaceutical companies is an investment in innovation. If companies and all stakeholders cannot generate sufficient profits, the development of revolutionary drugs will stall, which will cause even more damage to public health than high prices. Launching new drugs is costly, as the budget also includes advertising and marketing costs that will help spread the medicine (Vincent 75). Tax incentives and patenting conditions are facilitators of innovation, not a way to promote corruption and profit. Inflation, which makes the development of new drugs an increasingly costly process, is another reason for high costs.
A personal example of price change at Cost Plus Drug is not an anti-corruption behavior. The company offers only generic drugs, which means it does not take into account the cost of development, research and clinical trials. The Cost Plus Drug policy can be lifesaving for low-income citizens, but this solution is temporary. The Cost Plus Drug program is devastating to the industry as it encourages citizens to choose cheaper alternatives. If the demand for patent medicines continues to fall, companies will no longer have the funds for new developments. Pharmaceutical companies claim drug development is an important investment for the well-being of society, and the supply of cheap generics threatens the functioning of the whole industry.
Conclusion
Arguments from both sides of the debate are significant and present different views on the problem of high cost of drugs in the United States. Supporters of the theory about the corruption of the pharmaceutical industry point to the lack of transparency in pricing. With the example of Cost Plus Drug, buyers see that the system can offer cheap drugs at transparent prices. Patent laws and tax incentives bring even more profit to pharmaceutical companies. Opponents of the corruption theory point out that the cost of drug development is being overlooked. Cost Plus Drug only manages to provide cheap drugs because they offer generic medicines that are cheaper. Tax incentives and patenting laws encourage the search for innovative drugs. Both points of view have a right to exist, and the decision on this discussion should remain with the state regulators.
Works Cited
Cortese, Brian D., Sam S. Chang, and Ruchika Talwar. “Urological Drug Price Stewardship: Potential Cost Savings Based on the Mark Cuban Cost Plus Drug Company Model.” The Journal of Urology, vol. 209, no. 2, 2023, pp. 309-311, Web.
Gupta, Ravi, Nilay D. Shah, and Joseph S. Ross. “Generic Drugs in the United States: Policies to Address Pricing and Competition.” Clinical Pharmacology & Therapeutics, vol. 105, no. 2, 2019, pp. 329-337, Web.
Hilary Daniel, et al. “Policy recommendations to promote prescription drug competition: A position paper from the American College of Physicians.” Annals of Internal Medicine, vol. 173, no. 12, 2020, pp. 1002-1003, Web.
Lalani, Hussain S., Aaron S. Kesselheim, and Benjamin N. Rome. “Direct-to-Consumer Generic Drugs: A Maverick Approach or Another Exposure of Market Failures?” Annals of Internal Medicine, vol. 175, no. 6, 2022, pp. 890-891, Web.
Mitchell, Aaron P., et al. “Are Financial Payments from the Pharmaceutical Industry Associated with Physician Prescribing? A systematic review.” Annals of Internal Medicine, vol. 174, no. 3, 2021, pp. 353-361, Web.
Rodwin, Marc A. “Assessing US Pharmaceutical Policy and Pricing Reform Legislation in Light of European Price and Cost Control Strategies.” Journal of Health Politics, Policy and Law, vol. 47, no. 6, 2022, pp. 755-778, Web.
Vincent Rajkumar, S. “The High Cost of Prescription Drugs: Causes and Solutions.” Blood Cancer Journal, vol. 10, no. 6, 2020, pp. 71-78, Web.