September 24, 2023

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Treatment for Bill Hearn’s mild chronic obstructive pulmonary disease, or COPD, will cost $275 per month from CVS Pharmacy through their Medicare Part D prescription drug plan. But the 69-year-old retiree, who lives in Knoxville, Tennessee, is instead given a generic version from a new online pharmacy. It costs hundreds of dollars less.

“I’d read something about on Twitter, so I decided to check it out,” Hearn said in an email. “Their website is very easy to use to check availability and prices, and I was surprised to find a price of $75 a month for the same drug (as a generic). Last year the price was reduced to $60.50 .

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Cost Plus Drugs can offer significant savings over some prescription drugs, but there are also some downsides — especially for those with Medicare. Here’s what Medicare beneficiaries should know about this online pharmacy.

What is Cost Plus Drugs?

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The Mark Cuban Cost Plus Drug Co., or Cost Plus Drugs, is an online pharmacy for generic drugs. The company, which is slated to launch in January 2022, is named after Mark Cuban, a billionaire entrepreneur and philanthropic investor.

Cost Plus Drugs says it sells “more than 700 commonly prescribed generic drugs.” It does not sell any brand-name drugs or specialty drugs.

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Cost Plus Drugs is notable for offering affordable medicines with transparent prices. The company’s website says of its pricing model, “Every product we sell is priced exactly the same: our cost plus 15%, plus pharmacy fees, if any.”

Cost Plus Drugs offers this example for a 30-count supply of 400 milligrams of the cancer drug imatinib:

Manufacturing Cost: $31.20.

15% markup: $4.80 (rounded per pill).

Pharmacy labor (“pharmacy fee”): $3.

Including shipping, this would be $44 per month.

The company says this price provides a savings of over $9,600 compared to other companies’ retail prices. This comparison is probably based on the brand name Gleevec, which can cost $10,000 or more per month at retail. Generic imatinib is much cheaper, but it can still exceed $100 per month from major retail pharmacies with a Medicare prescription drug plan.

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Do Cost Plus Drugs Work With Medicare?

“We’re cheaper than Medicare copays, so we’re a great place for Medicare recipients to buy drugs,” Mark Cuban wrote in a Twitter direct message.

If you want to buy those low-cost drugs from Cost Plus Drugs, your Medicare plan won’t cover them. Cost plus drugs do not bill Medicare, whether you have a stand-alone Medicare Part D plan or a Medicare Advantage plan with prescription drug coverage. You will have to pay out of pocket for the drugs from Cost Plus Drugs, but it may be worth doing.

How Cost Plus Drugs Affects Your Medicare Part D Coverage

You do not receive any credit for your Part D deductible when you fill a prescription through Cost Plus Drugs. You meet the Part D deductible by paying only for drugs that are covered by your plan, and Cost Plus Drugs does not bill Medicare Part D plans.

You can still meet your Medicare Part D deductible by paying for other drugs not covered by your plan. For example, Cost Plus Drugs doesn’t sell brand-name drugs, so you can fill brand-name prescriptions through your Part D plan and meet the deductible that way.

If you fill most or all of your prescriptions through Cost Plus Drugs, however, you are potentially losing a lot of credits toward your deductible. You still have to pay your premiums, but your Medicare Part D plan doesn’t pay for your drugs until you meet the deductible.

Medicare Part D Penalty

If you take mostly or entirely generic drugs, it may be tempting to use cost plus drugs and go without Medicare Part D coverage. However, you may face Medicare Part D late enrollment penalties. You will need either Medicare Part D or some other type of reliable coverage (such as an employer plan) that is at least as good as Medicare Part D in order to avoid being penalized.

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Even if you can save money by using cost plus drugs and skipping Medicare Part D, you will face a Part D penalty if you sign up for (or back up to sign up for) Medicare Part D.

The Medicare Part D late enrollment penalty is 1% of the national base beneficiary premium — $32.74 per month in 2023 — for each full month you did not have qualifying prescription drug coverage, rounded to the nearest 10 cents.

For example, if you went without coverage for two years, or 24 months, your monthly penalty would be 24% of $32.74 in 2023, or $7.90 (rounded to the nearest 10 cents). This amount is added to your premium every month. It will go up or down in subsequent years depending on the national base beneficiary premium, but it never expires.

Can Cost Plus Drugs Partner with Medicare?

Cost Plus Drugs is not entirely opposed to working with insurance companies. As of February 2023, Cost Plus Drugs only works with one insurance plan — Capital Blue Cross — but the company’s website says “we will be adding more insurance plans in the coming months.”

Cuban described the company in a Twitter direct message as “willing and able to integrate” with government programs like Medicare, and said “but we haven’t had those discussions yet.”

If Medicare or Medicare Advantage companies entered into agreements with cost plus drugs, it could seriously shake up drug pricing. “If we can sell Medicare, we can save taxpayers billions of dollars,” Cuban wrote.

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A 2022 study published in the Annals of Internal Medicine estimated that Medicare could have saved about $3.3 billion in 2020 if it had purchased a subset of drugs available from Cost Plus Drugs at company rates. (For context, the total Medicare Part D budget for fiscal year 2020 was about $89 billion, according to the Congressional Budget Office.)

Are Cost Plus Drugs a Good Idea for Medicare Beneficiaries?

Medicare beneficiaries had an average of 54 prescriptions per year as of 2018, according to a data analysis by the Congressional Budget Office. In the data, one prescription equals a 30-day supply, so this fills approximately 4.5 prescriptions per month. Saving money on even a fraction of that can be a big deal for Medicare beneficiaries.

Cost Plus Drugs can be a good option for potential savings on generic drugs, even for people who already have other Medicare prescription drug coverage.

However, there are also some Medicare-specific downsides to cost plus drugs. Note these additional considerations:

Prescriptions filled through Cost Plus Drugs do not count toward the Medicare Part D deductible.

Cost Plus Drugs does not sell brand-name drugs (which tend to be the most expensive).

You’ll pay a heavy and permanent penalty to go without Medicare Part D coverage, so giving up your Part D plan isn’t a good idea, even if you can get a cheaper drug from Cost Plus Drugs.

In short, if you take a drug with a generic version, it’s worth checking the price on Cost Plus Drugs to see if you can potentially save money. But cost plus drugs is not a replacement for Medicare Part D, so be careful not to run into penalties that may exceed what you save on prescriptions.

This article was written with support from a journalism fellowship from The Gerontological Society of America, The Journalists Network on Generations, and The Silver Century Foundation.

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