Employers May Be Profiting From Sick Workers’ Drug Costs, Mark Cuban Alleges
A controversial system of drug rebates may be inadvertently allowing employers to benefit financially from the illnesses of their workforce, according to entrepreneur Mark Cuban.
Many employers are unknowingly collecting substantial drug rebate money funded by their sickest employees, a dynamic that has sparked concern over ethical obligations and potential legal ramifications. The issue, brought to light during Forbes’ Healthcare Summit in New York City last week, centers on the complex interplay between pharmacy benefit managers (PBMs), employers, and patients.
According to Cuban, a significant problem lies in how Americans pay for prescription drugs during their deductible periods. Individuals often pay the full list price for medications during this time, effectively subsidizing the rebates that ultimately flow back to PBMs and, crucially, their employers. This is a situation he believes many corporate leaders do not fully grasp.
Cuban illustrated the issue with a common scenario: an employee with a high-deductible health plan requires a brand-name drug like Eliquis, which can cost around $600 per month. Until the deductible is met, the employee is responsible for the entire cost, even if the PBM has already negotiated a significant rebate with the drug manufacturer.
“That rebate, which can amount to hundreds of dollars per prescription, never makes its way back to the patient footing the bill,” Cuban explained. “Instead, the money goes through the PBM and ultimately back to the employer.”
This structure, Cuban argues, fundamentally inverts the intended purpose of rebates – to lower costs for patients. Instead, it leverages patients’ out-of-pocket expenses to generate financial benefits for their employers. He cautioned that this practice could potentially violate the Employee Retirement Income Security Act (ERISA), which requires companies to act in the best interests of their employees.
To address this issue, Cuban advocates for direct-to-employer drug purchasing models, which bypass PBMs and secure transparent, net pricing. His company, Cost Plus Drugs, is actively developing such programs.
“I sit with the CEO, and I say, ‘Look, you are getting ripped off by your PBM. And I understand it’s difficult to just move, but there are a growing number of direct-to-employer programs that are being created,’” Cuban remarked.
Cost Plus Drugs is partnering with CenterWell, Humana’s healthcare services brand, to implement this model. Humana CEO James Rechtin emphasized the need to simplify the drug supply chain and increase transparency.
“With pharmacy, we basically looked at the traditional model, and we said, ‘We are not getting the cost efficiency, the affordability, that we need to to make sure that our members are getting access to medications,’” Rechtin stated. The company is increasingly contracting directly with manufacturers to reveal the true net cost of drugs, eliminating layers of intermediaries that inflate prices.
Both Rechtin and Cuban believe that scaling these efforts to eliminate middlemen could result in billions of dollars in savings for workers in out-of-pocket costs. The move towards greater transparency and direct negotiation promises a potential shift in the power dynamics of the pharmaceutical industry, ultimately benefiting those who need medications the most.
