Generic subscription services like Mark Cuban’s promise cheaper drugs — but will it work?

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The rising price of drugs and the complexity of the healthcare system have brought about the advent of online subscription generic drug services offering to cut out the middlemen. Now it’s time to see whether that’s economically viable.

Celebrity billionaire Mark Cuban founded perhaps the most visible of these services, Cost Plus Drugs, in January. Patients can receive certain prescription generic drugs in the mail from a list of 800 medicines the company gets straight from the manufacturer, skipping several steps that usually take place before consumers pick them up at a traditional pharmacy counter.

The problem they’re addressing isn’t minor.

About half of U.S. adults say they have had difficulty affording health care costs in the last year, according to the Kaiser Family Foundation. And a quarter of adults say they or a family member have resorted to forgoing prescriptions, cutting pills or skipping doses due to cost. More of these are households with lower incomes, Black and Hispanic adults, and women.

Even insurance doesn’t always help — about a third of adults worry about affording their monthly health insurance premium. And 41% of adults report having debt due to medical or dental bills, KFF found.

During the COVID-19 pandemic in particular, 82% of patients experienced delays receiving medications due to in-person restrictions, cost, insurance, miscommunication and poor transportation, according to a 2021 survey from CoverMyMeds.

Patients clearly need a better way to access medicine. So, what is the disruptive model that could break through the barriers to affordability without sacrificing the innovative and life-saving medicines available in the U.S.?

The promise

DiRx CEO and founder Satish Srinivasan

DiRx CEO and founder Satish Srinivasan

Permission granted by DiRx/Satish Srinivasan


Services like Cuban’s and its predecessor, DiRx, could fit the bill. DiRx, founded by CEO Satish Srinivasan, a former generics sales and marketing executive, is much the same as Cost Plus Drugs, but got its start a little earlier and with a few key differences.

One similarity is that both of the services do not accept health insurance.

“DiRx is a model to directly bring people their prescriptions at the lowest cost,” Srinivasan says. “By direct, we mean eliminating many of the layers of the supply chain in between — typically, when a manufacturer produces a prescription drug, it goes through three layers before it can get to the hands of the patients.”

From the manufacturer, a drug often goes to a big drug wholesaler, and then a pharmacy benefit manager and then the pharmacy where a patient picks it up, Srinivasan says.

“The actual cost of the product, especially in the case of generics, is very inexpensive,” Srinivasan says. “But each of these layers add cost — everybody’s here to do a certain function and make a profit.”

Through insurance, many patients can afford the cost of generic drugs, and although the HHS announced this week that the number of uninsured people in the U.S. reached an all-time low of 8% in early 2022, that number is still a sizable portion of the country. Many are also underinsured and have coverage that doesn’t meet their full expense of a claim.

Srinivasan says that two-thirds of the out-of-pocket prescription costs paid by the average American consumer is spent on generics. And because they’re considered inexpensive alternatives to branded medications, they often aren’t very well covered within the deductible.

DiRx, which has been around since Sept. 2021, offers a prescription service for 1,400 generic medicines and no pharmacy or shipping fees. But why are we just seeing this type of business model in action now?

“It’s just the way the industry has evolved, where there were a lot of M&A events happening on the distribution side to a place where all pharmacies big or small only purchase from the drug wholesaler,” Srinivasan says. “The advantage DiRx has is the founders, me included, are from the generic industry, so we know exactly how the contracts work — we know the pain points and how we could address those, and the consumer sees the pressures on the market and they think it’s about time somebody does something.”

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