Imagine this scenario for a moment. You are standing
at the pharmacy counter. Right. And you are holding
your breath. Your heart is pounding a little
bit in your chest. Because you are terrified
of what the pharmacist is about to say. Exactly.
You just got a prescription for a life saving
medication. Something you, or maybe a loved one,
absolutely needs to survive. The pharmacist taps
a few keys. They look at the screen. And then
they look up at you with this sympathetic wince.
Oh, that is the worst feeling. It is. And they
tell you your total is $800. Wow. For a one -month
supply. You feel that sinking sensation in your
chest. You know, that sudden panic of wondering
how on earth you're going to pay the rent, buy
groceries, and afford to stay alive all at the
exact same time. It is a terrifying reality for
so many people. Welcome to the Deep Dive. We
are so glad you are joining us today because
that terrifying scenario at the pharmacy counter
is not just some hypothetical fear. Not at all.
It is the lived reality for millions of Americans
navigating a system that often feels like it
was designed to confuse and just completely bankrupt
them. Yeah, it really does feel intentional sometimes.
Today, we are looking at the radical ongoing
transformation of the United States pharmaceutical
supply chain, specifically looking at 2025 and
2026. It is a massive shift. It is. And we have
a huge stack of sources to get through to make
sense of all this. We are pulling from deep industry
analyses from publications like Drug Channels
and Pharmaceutical Commerce. We also have some
incredible peer -reviewed academic studies to
look at today. Right. From JMA Network Open.
Plus, we've got government policy updates and
direct unfiltered insights from the Mark Cuban
Cost Plus Drug Company. A lot of ground to cover.
So our mission for this deep dive is to decode
exactly why prescription drugs cost so much in
the U .S. I mean, prices here are historically
two and a half times higher than in 32 other
purple countries. Which is just staggering when
you really think about it. It is. We are going
to examine the opaque mechanics of how middlemen
manipulate the system and most importantly we
want to see what new transparent business models
and this massive shift to domestic manufacturing
actually mean for you. Right for your wallet
and your health care. And the broader economy.
Okay let's unpack this. We have an ecosystem
that feels fundamentally broken to the person
standing at the register. Absolutely broken.
But it is clearly functioning exactly as intended
for a select few behind the scenes. We are essentially
looking at a war between an entrenched shadowy
status quo and a transparent physical rebellion.
That is a great way to put it. But to understand
the rebellion, we really have to diagnose the
underlying disease of the current system first.
Well, the underlying disease is entirely rooted
in information asymmetry. and really just the
sheer dominance of intermediaries. OK, break
that down for us. Sure. So if you look at the
traditional drug supply chain on a whiteboard,
it sounds relatively straightforward. Manufacturer
makes a drug. Right. A pharmaceutical manufacturer
makes a drug and sets a list price. Then a wholesaler
buys it. moves it across the country, and distributes
it. And finally, a pharmacy soars it on a shelf
and dispenses it to you. Exactly, it sounds simple.
But sitting right in the middle of that flow,
extracting immense value without ever actually
touching a single pill, is the pharmacy benefit
manager. The PBM. The PBM. And right now, three
major PBMs completely dominate the market. You
have CVS, Caremark, OptiMark, and Express Scripts.
They control the vast majority of the volume.
They do. And they operate using pricing metrics
that sound incredibly official, but are highly
malleable. Specifically, they use the average
wholesale price, or AWP. And the wholesale acquisition
cost rate. Right. The WAC. Exactly. But how do
those metrics actually function in the real world?
Because to the average person, Average wholesale
price sounds like a very fixed objective number.
Right, sounds official. It sounds like the price
you would pay if you walked into a giant warehouse
club to buy bulk paper towels. How are these
entities manipulating something that sounds so
standard? Think of the average wholesale price.
Less like an objective cost and more like the
sticker price on a new car at a dealership. OK,
nobody actually pays the sticker price. Right.
Nobody pays it. But the entire industry uses
it as a baseline to calculate artificial discounts.
What's fascinating here is how that baseline
enables what economists call the rebate distortion.
The rebate distortion. OK, explain that. So PBMs
negotiate massive rebates from drug manufacturers.
We are talking generally between between 85 to
88 % off that inflated average wholesale price.
88 % off? Yes. The PBM goes to the drug maker
and essentially says, hey, if you want your drug
on our approved list so that millions of insured
patients can actually get it, you need to give
us a massive rebate off your list price. And
the manufacturer just says yes. They have to
comply if they want volume. But to protect their
own profit margins, they artificially inflate
the list price of the drug in the first place.
Just to create room for the massive rebate. Exactly.
The manufacturer raises the price from, say,
$10 to $100, just so the PBM can demand an $85
discount and run around claiming they saved the
system money. That is exactly how it works. That
is absurd. But where does that $85 actually go?
Does it go back to the patient at the pharmacy
counter? Rarely. Conventionally, the PBM keeps
a percentage of the rebate they negotiated before
passing the rest on to the employer or the health
plan sponsor. Let's look at the math provided
in these industry analyses to really nail this
down. Sure. Let's assume a hypothetical generic
drug has an AWP of $100. $500 on paper. The PBM
negotiates that massive discount, bringing the
actual acquisition cost of the drug down to $15.
So they knock $85 off. Right. But the PBM decides
to keep a percentage of that original AWP rebate
for themselves. Just for doing the negotiations.
Yes. So suddenly the price of the drug bill to
the payer is twenty three dollars and fifty cents.
The PPM just pocketed eight dollars and fifty
cents on a drug that only cost fifteen dollars
to acquire. They extracted more than 50 percent
of the drugs value just for processing a transaction.
Precisely. That seems like an unsustainable grift
to me. If employers and health plan sponsors
are the ones actually footing the bill for this.
Why wouldn't they just look at the contract,
see the $8 .50 being skimmed, and demand a better
deal? Because they can't see it. They can't see
their own contracts. The contracts are notoriously
opaque. Large PBMs have created entirely new
layers of subsidiary entities specifically to
off the skate the money trail. What kind of entities?
They set up organizations called rebate aggregators
or group purchasing organizations. And many of
these entities are purposefully domiciled internationally.
Like overseas? Yes, in places like Switzerland
or Ireland. And they do this specifically to
prevent domestic audits and avoid transparency
requirements. That is unbelievable. Estimates
suggest another 8 % of rebates might be captured
right at this international subsidiary level.
So that hypothetical $15 drug is now costing
the system over $30. Easily. The list prices
are artificially inflated, the rebates are squeezed
out, and the money just vanishes into offshore
entities before the employer ever sees the final
accounting. It's a black box. It is. And on top
of that, PBMs charge a litany of fees to the
pharmaceutical companies. Or fees. Oh, yeah.
As of 2021, 29 % of PBM revenue was estimated
to come strictly from administrative fees. 29%.
Yes. That is a massive jump from 15 % back in
2015. What are they charging for? Promotional
allowances, implementation allowances, formulary
placement fees, data fees. It is literally a
toll booth on every single inch of the supply
chain. Mark Cuban recently wrote a guest post
on the Drug Channel's blog outlining this exact
dysfunction. It was a very pointed post. He laid
out a framework of major criticisms against how
these big PBMs operate. And you just hit on the
first one perfectly. absolute zero transparency.
Right. You can't see the math. He noted that
the primary rule of contracting with a PBM is
that you are legally barred from talking about
the PBM or the specifics of their contracts.
It's like Fight Club rules. Exactly. Yeah. Providers,
manufacturers, employers and non -affiliated
pharmacies are all legally gagged. It protects
the margin. But he also talked about how this
impacts the physical categorization of the drugs
themselves. He used the term magic names. Magic
names, yes. How does a PBM magically rename a
drug to extract more money? They utilize their
absolute control over the formulary, the master
list of covered drugs. Right. A PBM can take
a standard small molecule generic drug that has
been on the market for years, and they just arbitrarily
reclassify it as a specialty drug. Is there a
medical reason for that? Often, there is absolutely
no clinical justification for it. The drug doesn't
suddenly require a compliance refrigeration or
special handling. It's the same exact pill. Same
pill. But by slapping the specialty label on
it, the PBM can force the patient to bypass their
local community pharmacy. And mandate that they
use a mail order specialty pharmacy. Exactly.
A specialty pharmacy that is wholly owned by
the PBM itself. Ah, so they force the volume
to their own subsidiary. Yes. And once the drug
is channeled through their captive, wholly -owned
firmacy, they can charge the health plan exponentially
more than the drug is actually worth on the open
market. Because there's no competition. None.
They dictate the rules of the game, and they
own the board the game is played on. Let's ground
this in a real -world example so you listening
can truly grasp the scale of the financial pain
this causes. Let's look at the chemotherapy drug
Imatinib. The generic version of Gleevec. Right.
It's a leukemia treatment. It has been around
for a very long time. It is a standard generic
small molecule pill. Nothing fancy about the
physical pill itself. If a patient gets diagnosed
with leukemia and they happen to be on a high
deductible health plan, what does this PBM pricing
maze look like for them when they try to get
this life -saving generic? Under the traditional
convoluted PBM system, the adjudicated price
can be staggering. The adjudicated price, meaning
the final price negotiated by the PBM that the
patient is responsible for before they hit their
deductible. Correct. A patient might be asked
to pay anywhere from $2 ,000 to $3 ,200 for a
single one -month supply of generic imatinib.
Over $3 ,000. For a generic, yes, that is thousands
of dollars out of pocket. The system requires
the patient to absorb the inflated list price
until their massive deductible is fully met.
And this brings up a massive point of friction.
If an employer signs a contract with a PBM, they
might think they're getting a great deal because
the PBM promises them a large rebate check at
the end of the year. They love that rebate check.
Right. And the employer uses that check to lower
the overall health care premiums for the entire
company. Yeah. But who is actually funding that
rebate check? It isn't the drug manufacturer
just freely handing out cash from their vault.
Not at all. And if we connect this to the bigger
picture, the reality of corporate health care
financing is deeply troubling. How so? Those
rebates are largely paid for by the sickest and
oldest employees within a given company. Explain
the mechanics of that. Because the list prices
are kept artificially high to fund the rebate
structure employees with chronic conditions,
they hit their high deductibles very quickly.
Like the leukemia patient needing Imatinib? Exactly.
Or someone managing diabetes or rheumatoid arthritis.
They are paying those inflated thousands of dollars
prices out of pocket. Using their own after -tax
income? Yes. The PBM aggregates that overpayment,
takes its cut, and hands the remainder back to
the employer. And what does the employer do with
it? The employer then applies that money to lower
the monthly premium for the 25 -year -old employee
who never goes to the doctor. Wow. So essentially,
healthcare within the modern corporate structure
functions as a regressive tax. A massively regressive
tax. The sick employees are actively and disproportionately
subsidizing the healthcare costs of the healthy
employees. While the PBM skims a massive, multi
-billion dollar margin off the top just for facilitating
the transfer. It is incredibly efficient for
the PBM, but devastating for the patients. When
you map out the mechanics like that, it is genuinely
enraging. The sickest people at the absolute
most vulnerable moments of their lives are being
used as a funding mechanism for corporate premium
reductions and offshore middleman profits. It
is hard to justify when you see the math bear
like that. Cuban also pointed out how this system
financially abuses independent community pharmacies.
The mom and pop shops. Right. They are subjected
to aggressive audit tactics and forced to accept
reimbursement rates that are often lower than
the cost they paid to acquire the drug in the
first place. They're forced to take a loss just
to serve their patients. But diagnosing the disease
is only the first step. The market is finally
responding. We're seeing real pushback. A massive
structural pushback against this opaqueness.
Let's look at the emergence of the un -PBM model,
specifically the Mark Cuban Cost Plus drug company.
MCC PDC. They are trying to build an entirely
parallel supply chain. How is their corporate
structure fundamentally different from the incumbents
we just talked about? Well, MCC PDC was founded
in 2022 by Dr. Alexander Oshmanski and Mark Cuban,
and it operates as a public benefit corporation
or PBC. A public benefit corporation. Why does
that specific legal designation matter so much?
Because that legal designation is the foundation
of everything they do. A traditional C corporation,
like a major PBM, has a fiduciary duty solely
to maximize shareholder value. Meaning they have
to make as much money as legally possible. Right.
If a traditional PPM can legally extract an extra
billion dollars by hiding fees in an offshore
aggregator, they are essentially obligated to
do so for their shareholders. But a public benefit
corporation is different. Radically different.
The legal charter mandates that their social
mission must be prioritized alongside and sometimes
even above pure financial performance. And their
social mission here is improving public health
through transparent, affordable medicine. Exactly.
So they have fundamentally rejected the rebate
-centric model. They don't negotiate rebates.
They don't have offshore aggregators. They just
built a vertically integrated direct -to -consumer
supply chain. Using a strict cost -plus economic
model. The formula for this cost plus model is
almost jarringly simple when you compare it to
the convoluted average wholesale price and wholesale
acquisition cost metrics we just discussed. It
takes 10 seconds to explain. It is literally
just the actual acquisition cost of the drug,
what they paid the manufacturer to make it or
buy it, plus a fixed 15 % markup. to fund their
operations. Plus a flat $5 pharmacy labor fee.
And a flat $5 shipping fee. That is the entire
equation. No hidden implementation fees. No formula
replacement kickbacks. None. If we go back to
that leukemia drug in my TNIB, which was costing
the patient on the high deductible plan up to
$3 ,200 a month under the traditional system,
what does that exact same pill cost through this
transparent model? On the Cost Plus Drugs platform,
that exact same one -month supply of imatinib
costs between $13 .40 and $35 .10. $13 instead
of $3 ,000. You are looking at a savings of well
over 90%. The financial toxicity is completely
removed from the equation. Entirely. And their
ability to scale this model has been really significant.
They launched with roughly 100 essential medications.
And they grew very fast. They quickly scale to
over 2 ,200. And today, they carry over 2 ,500
different medications. They cover almost everything.
Right, from cardiovascular health and infections
diseases to oncology and dermatology. The data
in dermatology is particularly striking in the
reports. Yes. A recent analysis showed that MCC
PDC costs average roughly $17 for certain common
dermatology prospections. And if you compare
that to traditional discount. coupon platforms.
Or ones that still rely on the convoluted PDM
network to generate their prices. The average
cost there was over $31. Almost double the cost,
even with a discount coupon. Exactly. But it
isn't just a handful of anecdotes or cherry -picked
generic price drops. The academic community is
actively auditing this model to see if it holds
up at scale. Yes. There was a major study published
recently in JAMA Network Open that really dug
into the math on a systemic level. JAMA is about
as rigorous as it gets. They look at a specific
cohort of medications to see how the transparent
cash model stacked up against heavily negotiated
commercial insurance rates. What did the researchers
actually find when they ran the numbers? The
JAMA Network Open Study is a crucial piece of
validation for the model. The researchers analyzed
33 different neurological medications. Neurological
drugs are often chronic maintenance medications,
right? Exactly. Things for seizure disorders,
Parkinson's, or severe migraines. So the cumulative
cost burden for these patients is naturally very
high. So they compare the costs paid by third
-party commercial insurance plans, which utilize
PBMs, against the cash prices paid by patients
using cost -plus drugs. Right. And the primary
finding was that MCCTDC consistently delivered
lower total system costs across the board. Lower
total system costs? Yes. The fundamental cost
of acquiring and dispensing the drug was consi—
cheaper without the middleman extraction. Total
system cost is a vital concept for us to highlight
here. That means the patient's out -of -pocket
cost at the pharmacy counter, combined with whatever
massive balance the insurance plan paid behind
the scenes. It is the actual true cost of the
drug to society. But here's where it gets really
interesting. The YAMA study revealed a bizarre,
almost counterintuitive paradox in the data.
The paradox is fascinating. For some of these
neurological medications, patients who actually
had Good commercial insurance paid more out of
pocket using the cheap transparent cost plus
model than they would have if they just went
to their local pharmacy and use their traditional
insurance copay. It seems completely backward
at first glance. The researchers noted that it
was difficult to pinpoint exactly why the direct
to consumer model achieves lower total costs
for the system, but sometimes resulted in higher
immediate out of pocket costs for insured individuals.
Why does that happen? It seems paradoxical until
you understand the psychology of benefit design.
psychology of it. Yes. Traditional insurance
plans subsidize the immediate cost for the end
user at the pharmacy counter. They do this to
insulate the patient from the true cost of the
system. OK, let's walk through an example of
that. Let's say a drug has a massively inflated
list price of $400. The PBM negotiates it down
to $200, keeps $50, and bills the health plan
$150. OK, so the health plan is at $150. Right.
But the health plan allows the patient to pick
up the drug for a flat $10 copay. So the patient
feels great. They got a $400 drug for $10. Exactly.
Meanwhile, the system is bleeding capital, driving
up everyone's monthly premiums year over year
just to cover that hidden $150 charge. But the
patient doesn't see that on Tuesday when they
pick up the pill. They never see it. Now the
Cost Plus model might acquire that exact same
drug and sell it for a transparent flat rate
of $15 total. So the total system cost drops
from $150 to $15. That is a massive win for society.
It is. But to the individual patient standing
at the counter, their choice is either a $10
copay with their insurance card or a $15 cash
payment at Cost Plus. So the patient is essentially
asked to act against their own immediate financial
interest for the greater good of the overall
system, which is a very hard sell. If my copay
is $10. I am going to use my copay. I am not
going to voluntarily pay $15 cash just to save
my giant insurance company $150 in the background.
Exactly. It asks the consumer to bear the friction
of systemic reform. That is a tough hurdle. It
is exactly the friction we are seeing play out.
The individual patient feels insulated at the
exact moment of purchase. If they prioritize
their immediate subsidized copay over the macro
health of the health care system, the transparent
model really struggles to capture that insu—
volume. Why would I pay more out of pocket even
if my insurance company is being completely gouged
in the background? The traditional system relies
heavily on that apathy. It relies on the patient
not caring what the drug actually costs to the
system as long as their specific individual copay
is low. Overcoming that psychological hurdle
is the biggest challenge for the cost plus model
in the insured market. Without a doubt. And there
is another massive limitation to the direct -to
-consumer mail order model. Mail order is fantastic
for chronic maintenance medications. If you take
a statin for your cholesterol every single day,
getting a 90 -day supply in the mail works perfectly.
But healthcare is often acute and immediate.
If you wake up and your child has a raging fever
and strep throat, you cannot log onto a website.
request a prescription transfer, and wait three
to five business days for an antibiotic to arrive
in the mail. You need that amoxicillin right
now, today. The internet cannot solve acute physical
illness. Yeah. So Cos Plus drugs had to evolve.
They had to figure out a way to step out of the
digital space and integrate into the physical
brick and mortar world. Which brings us to their
physical retail alliances and the rollout of
the Team Cuban card. This is a really necessary
evolution. It was. It started as a relatively
contained pilot program specifically for employees
of the Dallas Mavericks and the various Mark
Cuban companies. They just wanted to test the
waters. They wanted to test if they could actually
bring transparent pricing to a physical register.
And it worked. And it has since expanded massively.
How massive are we talking? Patients can now
present their Team Cuban card, which functions
essentially like a transparent benefit card at
over 17 ,000 participating pharmacies across
the country. 17 ,000. That isn't just a niche
network of small mom and pop shops. No, it includes
massive national grocery chains, Kroger Albertsons,
Meijer Publix, and Food Lion operating right
alongside independent community pharmacies. So
they are building a parallel network within the
existing infrastructure. A parallel transparent
network. But if they're using the physical retail
space, they can't just charge a flat $5 shipping
and $5 labor fee like they do online. No, the
economics are totally different. Right. Running
a massive grocery store pharmacy or an independent
shop is vastly different than running a centralized
mail order warehouse. How does the transparent
cost plus math adapt to the physical register?
The pricing model maintains its absolute transparency,
but the variables adjust to reflect the reality
of retail overhead. Okay, walk us through the
new variables. If a patient walks into an affiliate
pharmacy and hands over the Team Cuban card,
The pricing structure is calculated precisely.
It is the wholesale acquisition cost of the drug
plus that standard 15 % markup for cost plus.
Okay, that part is the same. Plus a flat $12
baseline dispensing fee that goes entirely and
directly to the physical pharmacy. $12 straight
to the pharmacy. Yes. Plus a $1 processing fee
to run the network transaction. Let's break that
down with a real -world example from the retail
data. Let's look at fluoxetine. Say a patient
needs 30 capsules of 20mg Flooxetine, which is
the generic equivalent of Prozac. The acquisition
cost on the wholesale market is $0 .57. The 15
% markup on that $0 .57 is roughly $0 .08. And
then you add the $12 dispensing fee for the pharmacist
and the $1 processing fee. The total cost to
the patient at the register is exactly $13 .65.
That $12 dispensing fee seems like the absolute
linchpin of this entire physical strategy. It
is the entire ballgame for retail. For decades.
independent pharmacies have been screaming that
PBMs reimburse them at rates that literally force
them to lose money on every prescription they
fill. They are dealing with retroactive clawbacks
constantly. Right. Those are called DIR fees
or direct and indirect remuneration fees, where
a PBM will just randomly extract money from the
pharmacy months after a drug was dispensed. Just
crushing their margins. How does a guaranteed
$12 fee change the survival calculus? for an
independent pharmacist. It is literally the difference
between keeping the lights on and closing the
doors forever. Give us some precise context on
that. Let's look at the operational reality for
an independent owner. Take Tara Schneider. She's
a pharmacist who owns and operates Middletown
Pharmacy in Kentucky. She provided an analysis
of her profit margins under traditional PBM contracts
versus this transparent model. What did the numbers
show? She pointed out that when she fills a standard
30 -day supply of the generic acid reflux drug
Pantoprazole under a traditional major commercial
insurance plan like UnitedHealthcare, Her pharmacy
nets a profit of exactly $1 .38. $1 .38. To stock
the drug consult with the patient, process the
complex insurance claim, and dispense the medication
safely. Yes. Compare that $1 .38 to the guaranteed
un -clawable $12 she makes under the Team Cuban
card. That is a night and day difference. Furthermore,
for cold chain drugs that require heavy refrigeration
or drugs with complex FDA risk evaluation and
mitigation strategies known as REMAS. Drugs that
require extensive pharmacist monitoring. Exactly.
For those complex drugs, the fee goes up to $14.
PBMs have been squeezing independent pharmacies
to the point of bankruptcy, creating massive
pharmacy deserts in rural and low -income areas.
And this transparent flat fee model offers them
a sustainable, predictable way to actually stay
in business. It is a profound shift for the retail
landscape. The vast majority of patients, some
surveys say around 85%, still prefer getting
their prescriptions from a physical brick and
mortar pharmacy rather than an anonymous mail
order facility. People want to establish a relationship
with their pharmacist. They do. They want to
be able to ask questions about drug interactions.
They want immediate care when they are sick.
And now this parallel network allows them to
get that care without getting completely gouged.
While ensuring the independent pharmacist actually
makes a living wage for their clinical expertise.
It feels like a massive victory. But we have
to acknowledge a hard truth about the pharmaceutical
market. As amazing as these savings on generic
pills are, the generic market is only a fraction
of the total spending. That is unfortunately
very true. The real financial toxicity, the overwhelming
burden that crushes health plan budgets, lies
in what the industry calls specialty drugs. That
is correct. While small molecule generic drugs
make up over 90 % of the actual physical prescriptions
filled in the United States, they account for
a relatively small percentage of the total national
drug spending. The real money. The billions upon
billions of dollars that drive the PBM profit
engines is heavily concentrated in specialty
medicines. And these are not simple chemical
compounds pressed into a pill. No, they're incredibly
complex, often biologic drugs. Biologics are
essentially large, highly complex molecules manufactured
inside living systems like microorganisms or
specially engineered plant or animal cell lines.
They are notoriously difficult to manufacture,
highly sensitive to temperature and handling.
and they are used to treat severe, chronic, and
complex conditions. Things like rheumatoid arthritis,
severe plaque psoriasis, Crohn's disease, and
various forms of cancer. And precisely because
their list prices are so astronomically high,
often tens or hundreds of thousands of dollars
a year, they are the primary battlefield for
PBM rebate negotiations. The fact that MCC PDC
is now aggressively entering this highly guarded
specialty space is a monumental shift in strategy.
And their weapon of choice to breach this fortress
is the biosimilar. The biosimilar, yes. For the
listener, a biosimilar is conceptually akin to
a generic version of a biologic drug. It isn't
chemically identical because you are dealing
with living cells. Right, you can't perfectly
clone a living cell batch. But the FDA certifies
that it has no clinically meaningful differences
from the highly expensive original reference
drug. The sources point to a massive new addition
to the Cost Plus portfolio that illustrates this
perfectly. They have added a drug called Stargemsa.
This is a biosimilar for a massive blockbuster
inflammatory drug called Stellara. Stellara has
historically cost patients and health plans tens
of thousands of dollars a year. It is a massive
line item on any corporate health budget. What
is Cost Plus Drugs listing this biosimilar for?
They are completely bypassing the traditional
specialty pharmacy markup. Cost Plus Drugs is
listing Star Gemza at a starting price of $345
per quarter for a pre -filled syringe. $345 a
quarter. That represents an astonishing 99 %
drop from the Reference Biologics original list
price. That is insane. A 99 % drop. They are
taking a drug that used to define financial toxicity
for autoimmune patients and pricing it like a
standard mid -tier generic. That is a staggering
press collapse. But the traditional PBMs aren't
just going to sit back and let their most profitable
revenue streams evaporate overnight. Oh, definitely
not. They control the formularies. They control
what the insurance plans actually cover. If we
look at how the massive incumbents are reacting
to the introduction of these cheap biosimilars,
it exposes a lot of the hypocrisy in the system.
If we connect this to the bigger picture of corporate
strategy, The launch of Stargemza exposes the
deep systemic dysfunction of the traditional
drug channel. Let's talk about Express Scripts.
How is a giant like Express Scripts handling
the formulary placement for Stellara and its
biosimilars as we head into 2026? We have a detailed
report from drug channels analyzing Express Scripts'
national preferred formulary strategy for 2026.
What are they doing? On the surface, Express
Scripts is taking what looks like a positive
step. They are removing the massively expensive
original reference products to Lara from their
preferred formulary, forcing patients toward
biosimilars. Well, that sounds like a win for
the system on paper. On paper, yes. But the mechanics
of how they are doing it maintain a bizarre pricing
double standard. What kind of double standard?
They're adding cheap, deeply discounted biosimilars
to the list, yes, but they are also giving preferred
co -equal placement to a much higher priced private
label version of the exact same biosimilar. A
private label version? Yes. This higher priced
version comes from a company called Qualent Pharmaceuticals,
which is essentially sourcing the drug from Samsung
BioAbyss. And what's the catch with Qualent?
The catch is that Qualent is a private label
subsidiary, heavily affiliated with the PBM ecosystem
itself. OK, let me make sure I'm following the
shell game here. The PBM is pushing a cheap version
of the drug onto the fornillary. Right. But right
next to it, they're pushing a vastly more expensive
version of the exact same clinical drug produced
by a company that is affiliated with the PBM's
own corporate structure. That is exactly what
they're doing. actively choose the higher priced
biosimilar when a functionally identical cheap
one is sitting right there. Because of the addiction
to rebates? It always comes back to the rebates.
Always. The higher priced private label biosimilar
generates a massive rebate spread. The employer
chooses the high list price because they know
it comes with a massive rebate check at the end
of the quarter. Which they use to artificially
buy down their overall premium costs to make
their benefits package look more attractive to
employees. Exactly. And the PBM happily facilitates
this because they take a cut of that massive
rebate as it flows through their hands. It's
just moving money in circles. As the prominent
industry analyst Adam Fain noted in our research
stack, employer plan sponsors suffer from an
unrequited love of rebates over lower true prices.
An unrequited love of rebates. That is a brutal
assessment. It is accurate, though. They are
completely addicted to the cash flow of the rebate
check. They prioritize that cash flow even if
it means that sickest employees are forced to
pay heavily inflated co -insurance out of pocket
based on the higher list price of the private
label drug. It is a financial shell game that
prioritizes corporate balance sheets over patient
affordability every single time. And MCC PDC's
entry into the specialty market with a flat non
-negotiable $345 price tag fundamentally threatens
this entire shell game. Because it forcefully
exposes to the public exactly what the drug actually
costs to manufacture and distribute without the
rebate inflation. It strips away all the plausible
deniability. It is incredible how deep the dysfunction
goes and how complicit the employers are in maintaining
it just to get a discount on their premiums.
It's systemic. But pricing manipulation and formulary
games are only one side of the coin. The other
side, the side that is arguably much more terrifying
on a physical level, is actual availability.
The physical supply chain. Because right now,
The United States is dealing with a catastrophic
ongoing physical supply chain crisis. We are
literally running out of basic foundational drugs.
The shortage numbers are alarming. As of the
time these analyses were published. There are
roughly 200 different drugs in active shortage
across the U .S. 200. And we aren't talking about
rare experimental new therapies that are hard
to make. We're talking about critical decades
old life saving generic medications. Hospitals
are running out of albuterol for acute asthma
attacks. They are rationing pediatric chemotherapies
for children with cancer. How is it possible
that the wealthiest country in the history of
human civilization cannot keep basic 60 year
old medicines on the shelf? The root cause of
these physical shortages is complex, but the
essential underlying dynamic is a fundamentally
dysfunctional market for the physical distribution
of pharmaceuticals. We just spent a lot of time
talking about how PBMs control the pricing and
insurance side. But when it comes to the physical
purchasing and movement of generic drugs, the
market is controlled by a massive bottleneck.
What kind of bottleneck? Just three major wholesaler
sourcing programs dominate the entire landscape.
Three. Together, these three centralized purchasing
entities account for approximately 90 % of all
generic pharmaceutical purchases from manufacturers
in the U .S. 90 % controlled by just three entities.
That is an extreme bottleneck. It is essentially
an oligopsiny. When you have that much concentrated
buying power, you completely dictate the terms
of survival for the manufacturers. How does that
consolidation directly lead to empty shelves
in a hospital? Because generic drugs are viewed
by these wholesalers entirely as undifferentiated
commodity products. They don't care about brand
loyalty. They don't care about brand loyalty.
They care about the absolute lowest fraction
of a cent per pill. So how do they negotiate?
These massive wholesalers generally utilize group
purchasing organizations or GPOs to negotiate.
They will issue a contract for a specific generic
drug and they almost universally award that massive
exclusive contract to a single primary provider.
The lowest bidder. The absolute lowest bidder.
This creates a relentless, ruthless race to the
bottom on price. To win the contract and survive,
generic manufacturers have to slash every conceivable
operational cost. They offshore their manufacturing
to countries with vastly cheaper labor pools
and looser environmental and regulatory oversight.
And they eliminate any redundant manufacturing
lines. There is no backup factory. None. They
run their primary facilities at absolute maximum
capacity 24 hours a day with zero margin for
error. So the supply chain becomes incredibly
brittle and hyper extended. If you rely entirely
on a single factory running at maximum capacity
halfway across the world, what happens when reality
strikes? If a factory in India or China discovers
a bacterial contamination in a clean room or
a hurricane hits a major shipping port or there
is a sudden geopolitical trade dispute. The whole
US supply chain for that specific drug just instantly
collapses. There is no slack in the system to
absorb the shock. The vulnerability is staggering.
Industry data indicates that a massive 72 percent
of all the active pharmaceutical ingredient or
API suppliers for the U .S. market are located
overseas. The API is the actual chemical compound
that makes the drug work. We don't even make
the raw ingredients here anymore. When a single
overseas supply line goes down due to a failed
FDA inspection or a localized disruption, it
can take a year or more for a new manufacturing
line to be approved, validated and established
to address the shortfall. And the human cost
of this is severe. The rates of morbidity and
mortality for certain pediatric cancers in the
U .S. have actually gone up in recent years simply
because the baseline generic medications necessary
to treat them are physically unavailable. The
system has optimized for chippedness at the absolute
expense of resilience. MCC PDC, by contrast,
is trying to build a resilient model. They currently
source roughly 40 % of their APIs from strong,
highly regulated jurisdictions. Compared to the
broader industry average of just 10%. But simply
sourcing better ingredients from reliable allies
isn't enough to solve the physical shortage problem.
Right. So what does this all mean? It means we
have to stop relying entirely on vulnerable global
networks for our most critical survival tools.
We have to start building our own factories again.
We have to bring the manufacturing back home.
And that leads us to the most physical, tangible
part of this entire market transformation, the
massive return of American pharmaceutical manufacturing.
And specifically, the tip of the spear in this
movement is MCC PDC's Dallas pilot plant. MCC
PDC recognized very early on that relying on
vulnerable offshore supply chains fundamentally
contradicted their core mission of reliable,
affordable access. You cannot guarantee a transparent
price if you don't actually have the drug to
sell. So they made a massive capital expenditure.
They built an $11 million, $22 ,600 square foot
advanced manufacturing plant right in the middle
of the deep Elam neighborhood of Dallas, Texas.
But this is not your trad— additional sprawling
pharmaceutical factory churning out. billions
of oral tablets in massive vats. No, the Dallas
facility is highly specialized and incredibly
modern. It focuses exclusively on sterile fill
-finish injectables. These are the specific types
of medications that are most frequently landing
on the FDA shortage list. We are talking about
critical emergency drugs, things like epinephrine
for severe allergic reactions. And norepinephrine,
which is absolutely vital for maintaining blood
pressure in patients suffering from severe shock
in the ICU. When you look at the descriptions
of this facility, It sounds like something out
of a science fiction movie. The outside blends
right into the deep LM arts district. It has
this vibrant massive mural featuring a pegasus
intertwined with DNA strands. But inside it is
a master class in modern engineering. You don't
see massive open vats or technicians in standard
lab coats. You see incredible stainless steel
water for injection generation systems, miles
of pristine perfectly welded piping, and these
incredibly advanced VanRX robotic fill finished
systems operating completely inside sealed sterile
glass enclosures. The robotic technology is what
makes this plant truly revolutionary. It completely
removes the human element from the sterile environment,
which drastically reduces the risk of contamination.
The facility utilizes single -use disposable
components, meaning they don't have to spend
days scrubbing and sterilizing permanent steel
pipes between drug runs. They use robotic arms
to handle the vials and AI machine vision systems
to monitor product quality and particulate matter.
in real time. You have to shut the entire system
down, perform exhaustive cleaning, scurrilize
the equipment run validation batches, and often
wait for new regulatory sign -offs. The advanced
robotic systems in the Dallas plant are designed
for hyperagility. They can pivot the entire manufacturing
line to address a sudden national drug shortage
in just four hours. Four hours. That is mind
-blowing agility. A hospital could announce they
are out of emergency epinephrine on a Tuesday
morning, and by Tuesday afternoon a factory in
Texas is already spinning up a line to replace
it. How is that even possible from a regulatory
standpoint? Doesn't the FDA require mountains
of paperwork before you can just switch production?
They achieve this unprecedented speed partly
through the robotic technology but equally through
a very specific regulatory strategy. The Dallas
facility operates under a special FDA designation
known as a 503b outsourcing compounding site.
What does that designation allow them to do?
This designation was created under the Drug Quality
and Security Act to bridge the gap between small
-time neighborhood compounding pharmacies and
massive, rigid drug manufacturers. large batches
of drugs that are currently listed on the FDA's
official shortage list. Without having to go
through the years -long traditional new drug
application process for every single batch. It
gives them the legal flexibility to rapidly pivot
and manufacture whatever the market desperately
needs that week. While still maintaining full
compliance with strict current good manufacturing
practices. Right now the pilot facility's capacity
is estimated at roughly one to two million sterile
doses a year. That is enough volume to completely
alleviate acute shortages for four or five large
regional hospital systems. But they view this
as just a proof of concept. They already drafted
blueprints for a massive $300 million expansion
facility capable of producing over 100 million
sterile units annually. A facility of that monumental
scale could theoretically alleviate the majority
of acute sterile drug shortages across the entire
United States. But to build a $300 million mega
plant? you need massive capital injection. And
you need the broader regulatory environment to
actively cooperate with your expansion. Which
is exactly why Mark Cuban has been very publicly
pushing the government to change its fee structures.
Specifically advocating for the waiver of the
FDA generic drug approval fee. The general public
probably doesn't realize this, but it costs a
fortune just to ask the government for permission
to make a generic drug. Right now, a manufacturer
has to pay roughly $360 ,000 in user fees just
to get the FDA to review an application to produce
a generic medication that has already been proven
safe for decades. Cuban argues that waiving this
exorbitant fee for domestic producers would drastically
lower the barrier to entry, allowing companies
to rapidly expand production into low -margin
rare disease drugs and other critical shortage
areas without taking a massive financial hit
just on the paperwork. And this push for domestic
manufacturing isn't just a pet project of Mark
Cuban. It isn't happening in a vacuum. If we
zoom out and look at the macro trends, the MCPDC
Dallas plant is just the vanguard of a much larger
historic boom in domestic pharmaceutical manufacturing
spanning 2025 and 2026. The entire global industry
is experiencing a paradigm shift. They are collectively
recognizing that the era of hyper globalized
brittle supply chains prioritizing absolute lowest
cost over reliability is over. The capital commitments
being made by the major players right now. are
staggering. The numbers coming from the industry
trackers are genuinely historic. We are talking
about hundreds of billions of dollars being poured
into American soil to build factories. Merck
is committing over 70 billion dollars for domestic
investments, which includes building a massive
new manufacturing center of excellence. Eli Lilly
is pledging 27 billion dollars to construct four
advanced mega sites. AstraZeneca just unveiled
a 50 billion dollar investment plan. Johnson
& Johnson is committing 55 billion. Why is the
entire industry suddenly rushing to build massive
expensive factories in the U .S. all at the same
time? There is a confluence of powerful drivers
behind this macro shift. First and foremost is
the lingering supply chain trauma of the pandemic.
Companies realized that relying on a single factory
in a geopolitical rivals territory is an existential
threat to their business. They are forced to
prioritize physical resilience. Second, there
is a massive surging shift in consumer demand.
We are seeing the explosion of novel complex
therapies, specifically the new class of GLP
-1 obesity. and diabetes drugs. Along with incredibly
advanced treatments like Sogar T -cell therapies
and gene therapies. These are not simple pills.
They require high capacity, highly sterile bioprocessing
environments that are vastly better suited for
strict domestic oversight and a highly educated
local workforce. Third, macroeconomic and geopolitical
tensions are forcing the issue. The threat of
sweeping trade policies and tariffs is very real.
Current analysis suggests that proposed U .S.
tariffs could potentially add up to $19 billion.
in excess costs to the global pharma supply chain.
It makes immense financial sense for these multinational
companies to build locally to avoid those massive
penalties and ensure uninterrupted access to
the lucrative American market. And the federal
government isn't just sitting back. They are
actively greasing the wheels to accelerate this
onshore. They know that building a bioprocessing
plant is a regulatory nightmare that usually
takes years. In May of 2025, a sweeping executive
order was passed specifically directing the FDA
to slash red tape and streamline the approval
processes for U .S. based drug manufacturing
plants. And they followed that up in August of
2025 by launching the FDA PreCheck initiative.
This program provides pharmaceutical companies
with early frequent direct communication and
feedback from regulators during the actual construction
and process design phases of the facility. Drastically
accelerating the timeline from breaking ground
to fully operational production. However, this
massive industrial shift raises a critical, potentially
troubling question for you the listener to consider
regarding the future of your pharmacy bill. Onshore
-ing undeniably fixes the physical shortage risk.
It undeniably fixes the severe quality control
issues that stem from poorly regulated offshore
factories. But operating a high -tech facility
with American labor, paying American wages, and
adhering to strict domestic EPA and OSHA standards
is fundamentally and permanently more expensive
than running a sweatshop factory overseas. Analysts
are warning that these heightened permanent domestic
manufacturing costs, combined with the hundreds
of billions of dollars currently being spent
on capital expenditures to build the plants,
could ultimately raise the baseline floor price
of generic drugs across the board. So the crucial
question becomes, will the massive savings generated
by eliminating the greedy PBM middlemen be enough
to offset the structurally higher cost of domestic
manufacturing? Can we actually have a system
that provides resilient, high -quality American
-made drugs that are still affordable for the
average citizen? That is the multi -billion dollar
question that will define the next decade of
health care. And while the physical supply chain
is rebuilding itself from the ground up, the
intricate insurance landscape is simultaneously
fracturing under the weight of new complex legislation.
We really need to pivot and look at what is happening
with the government's role in this specifically
Medicare Part D. Because the unintended consequences
of recent policy are hitting seniors incredibly
hard right now. According to deep granular analysis
from our industry sources, the Medicare Part
D standalone prescription drug plan market is
essentially undergoing a collapse. And this collapse
is a direct, albeit unintended, result of the
Inflation Reduction Act or the IRA. The IRA was
celebrated for capping out -of -pocket costs
for seniors. But to achieve that, it fundamentally
redesigned the liability structure for the insurance
plans themselves. Prior to the IRA, if a senior
had catastrophic drug costs, the federal government
Medicare absorbed roughly 80 % of that liability
in the catastrophic phase. The IRA flipped that
entirely. It capped the seniors out of pocket
spend, but shifted massive financial liability
directly onto the private insurance plans. Forcing
them to absorb roughly 60 % of those catastrophic
costs. So the government told the private insurance
companies, we aren't covering the worst case
scenarios anymore, you are. How did the massive
insurance companies react to suddenly being on
the hook for billions of dollars in new liability?
They bailed. They aggressively exited the market
or consolidated their offerings to shed risk.
In 2026, there will be only 360 standalone prescription
drug plans available nationwide. That represents
a massive 22 % drop in available plans from just
2025. And the resulting market consolidation
is terrifying from a competitive standpoint.
Just four massive companies, Centene, HCSC, Humana,
and United Health, will control a staggering
84 % of the entire prescription drug plan market.
With drastically less competition and substantially
higher liabilities, these remaining plans are
aggressively shifting costs wherever they legally
can. Seniors are facing higher deductibles right
out of the gate, and a much greater reliance
on steep coinsurance percentages for non -specialty
brand drugs. The bitter irony is that if a Medicare
beneficiary doesn't have catastrophic costs,
if they don't hit the new $2 ,000 annual out
-of -pocket cap, They may actually end up paying
significantly more for their daily routine medications
this year than they did before the reform was
passed. It is incredibly frustrating to watch.
You pass sweeping legislation with the intent
to help vulnerable people and the market just
contorts itself, consolidates power, and squeezes
them somewhere else to maintain profit margins.
We are also seeing a similar distortion with
the 340B drug pricing program. This was originally
a very targeted program designed specifically
to help true safety net hospitals buy drugs at
a steep discount so they could afford to serve
uninsured and vulnerable populations. But recent
reports show the program is expanding wildly
beyond its original intent. It is being driven
by the strategic choices of massive wealthy hospital
systems aggressively buying up independent wealthy
suburban clinics. just so they can claim the
three, four to be discount across a wider patient
base. This rampant vertical integration is fueling
higher federal spending and actively raising
costs for commercial payers in the private market.
In this incredibly chaotic, rapidly shifting
environment of collapsing insurance markets and
expanding loopholes, alternative tech solutions
and policy partnerships are becoming vital survival
strategies. That is exactly right. Innovative
disruptors like MCC PDC aren't just relying on
their brick and mortar pharmacy alliances and
a single manufacturing plant in Dallas. They
are heavily leveraging advanced technology to
scale their operations efficiently. They recently
formed a major partnership with a company called
MedChat .ai to deploy sophisticated artificial
intelligence customer care agents. When you are
running a direct -to -consumer healthcare model
that serves millions of patients, patient support
is critical. People have questions about their
prescriptions. AI allows them to scale that support
infinitely and instantaneously without exponentially
increasing their human overhead costs. Which
is absolutely vital for maintaining that incredibly
slim, transparent 15 % profit margin. They have
also formed strategic alliances with other domestic
manufacturers like Alkom Laboratories to specifically
focus on using automated AI driven platforms
to onshore the production of highly essential,
vulnerable medicines targeting specific shortage
drugs like lidocaine and diltiesm. And we absolutely
cannot discuss the landscape of 2026 without
addressing the massive shifts in the political
landscape. Now, just to be absolutely clear to
you, our listener, we do not endorse any political
viewpoints, candidates or administrations on
this deep dive. Right. Our mandate is strictly
to analyze the factual policy framework and the
economic market reactions precisely as they are
presented in the data. With that strict impartiality
in mind, a major development rocking the industry
is the announcement of the Trump -Rx partnership.
What exactly is the mechanism of this new program?
The TrumperX platform, which is slated to launch
in early 2026, is fundamentally designed as a
government -sponsored direct purchasing search
engine. It is crucial to understand that it is
not a direct seller. or a physical distributor
of drugs itself. Instead, it acts as a massive
referral hub that directs patients toward transparent
direct -to -consumer websites like Cost Plus
Drugs. The underlying strategy is to use the
immense reach of a government platform to drive
massive consumer volume toward these transparent
low -cost options, theoretically starving the
opaque PBMs of their transaction volume. Pfizer
was notably one of the first major legacy pharmaceutical
manufacturers to publicly sign onto this initiative.
And the geopolitical angle here is deeply intertwined.
By joining the Trump -Rex hub, Pfizer successfully
secured a three -year grace period during which
its imported products will not be subject to
the sweeping new tariffs. Allowing them to avoid
billions in those supply chain penalties we discussed
earlier. It is fascinating to see how policy
tariffs and correct your consumer models are
all colliding. Mark Cuban's public reaction to
the Trump -Rex announcement was really interesting
to dissect. He essentially gave the program a
B grade on social media. His reasoning for the
slightly muted grade was based on market indicators.
He noted that the stock prices of the major publicly
traded PBMs didn't immediately plummet when the
platform was announced. To him, that implies
the broader financial market doesn't believe
the big middlemen are facing an immediate existential
threat from a search engine. However, Cuban also
pragmatically noted that being listed on a massive
government referral hub will undeniably drive
massive new patient volume directly to cost plus
drugs. And in his strict cost plus economic model,
higher volume directly equates to greater purchasing
power, which ultimately results in even lower
acquisition costs for patients. But prominent
industry analysts remain highly cautious about
the ultimate systemic impact. In the research,
Jesse Mendelson, a senior executive at the revenue
management firm Model N, pointed it out that
the true long -term impact of trunk Rx remains
to be seen. His core argument. is that the vast
overwhelming majority of Americans still fundamentally
rely on their commercial insurance to pay for
their drugs. A direct -to -consumer search engine
is a fantastic tool that vastly expands access
for the uninsured or for patients who are willing
to pay cash outside of their high deductibles.
But it doesn't fundamentally rewrite the deeply
entrenched complex dynamics of how commercial
insurers re -boost for drugs, or how massive
pharmaceutical manufacturers incentivize those
payers through the opaque rebate system. It creates
a viable alternative pathway for many, but it
is not necessarily a complete systemic replacement
for the existing multi -trillion dollar insurance
machine. Okay, let's bring this all together.
We have covered a truly massive amount of ground
today. We are witnessing a monumental historic
paradigm shift in exactly how we get our medicine
in this country. The pharmaceutical supply chain
is slowly agonizingly, but definitely moving
away from a dark, broken system defined by opaque
rebates, hyper fragile offshore supply lines
and total PVM dominance. We are visibly moving
toward a future defined by advanced domestic
robotic manufacturing, AI integration and radically
transparent cost plus economics. seeing independent
community pharmacies thrown a vital lifeline,
and everyday patients saving thousands of dollars
on life -saving generic drugs. This shift from
opaqueness to transparency is real, and it is
accelerating. This raises an important question
for you to ask yourself regarding your own health
care footprint. Take a hard look at your employer's
insurance plan. Look closely at your deductibles,
your copays, and the specific rules regarding
where you are allowed to fill your prescriptions.
Ask yourself, and maybe even ask your HR department,
are you unknowingly paying inflated out -of -pocket
costs at the pharmacy counter just to subsidize
corporate rebate checks? Are you the one secretly
funding the regressive tax of modern health care?
The tools for absolute price transparency now
exist in the open market. The onus is increasingly
shifting onto employers, plan sponsors, and individual
patients to aggressively demand that transparency
from their benefit providers. Absolutely. The
curtain has finally been pulled back, and we
simply cannot unsee how the machine actually
works. But I want to leave you with one final
provocative thought to mull over. Something that
builds on everything we've dissected today, but
pushes the implications a step further into the
future. If transparent cost plus price becomes
the universal mandatory standard. If Mark Cuban's
vision completely wins out and the massive inflated
profit margins generated by PBMs and complex
patent thickets are entirely wiped out of the
system. What happens to the billions and billions
of dollars required to fund the next generation
of breakthrough miracle drugs? Developing a novel
gene therapy or a cure for Alzheimer's requires
immense high -risk capital. Will true ruthless
price transparency accidentally kill the massive
financial incentives required for future clinical
innovation? It is a heavy question to think about
the next time you pick up a prescription. Thank
you so much for joining us on this Deep Dive.
We will catch you next time.