Editorial: Will Mark Cuban partnership be the right prescription for pharmacy ills?

A company has to make a profit to stay in business.

Everything has a cost, and those costs go up. To stay ahead of that curve, and to make sure the owner or investors are also getting a pay day, a company needs to make more money than it pays for product and overhead. That’s not just economics. It’s simple arithmetic.

Pharmacy benefit managers are creating an issue with this math problem. By acting as a middleman between drug manufacturers and insurance companies, they create agreements on what drugs a plan will cover and what price an insurer will pay for them.

In most cases, this leaves out one key party: the pharmacy that has to buy the drugs from the manufacturer and provide them to the customer, taking payment from the insurance company. The agreements might mean a drug store pays $100 for a medication and is paid $75, losing 25% on the price alone. The loss is compounded when you account for the pharmacist’s paycheck and the cost of keeping the lights on and the doors open.

It is therefore unsurprising that a number of pharmacies have closed in recent years — from mom-and-pop shops to big chains.

There should be a way to facilitate affordable, efficient transactions between pharmaceutical companies and insurers without bankrupting drug stores. If the situation continues, fewer people will be able to get the medications they need. If drug stores can’t afford to stay open, people will struggle to find their prescriptions.

So what is the solution? According to billionaire Mark Cuban, it’s focusing on the pharmacy benefit managers.

“Get rid of them,” the Mt. Lebanon native said in an appearance in Robinson.

Cuban owns Cost Plus Drugs, an online service that bypasses the middlemen and either manufactures drugs itself or negotiates its own deal with pharmaceutical companies. Cuban was in town to announce a partnership with Giant Eagle. To date, he has partnered with 16,000 pharmacies.

The partnership acknowledges certain realities of modern retail. Sometimes it’s cheaper to get something through the mail. Sometimes it’s cheaper in person — and sometimes a medication is an immediate need that can’t wait for shipping.

The timing seems appropriate, as Cost Plus has expanded its catalog of pharmaceuticals and Giant Eagle is expanding its customer base after acquiring the customers from about 80 Rite Aid stores.

One might argue that Cost Plus is just replacing benefit managers. That’s fair, but it isn’t replacing the essentially useless role of middleman, which really adds no value to the transaction and exists behind a veil. Cost Plus would be visible as an online option, and it is being transparent about its 15% profits.

Is this a solution? Maybe. Maybe not. That remains to be seen. But it is an attempt at a solution, a way to look at the puzzle pieces and try to find the best fit.

Prescriptions must be both accessible and affordable. Pharmacy benefit managers are interfering with both. Creative thinking could cure that.