Community Health Systems (CHS) is expanding a previously announced partnership with Mark Cuban Cost Plus Drugs Company to all 71 of its affiliated hospitals, the for-profit system announced Thursday morning.
The hospitals will begin by purchasing 12 drugs from the company's marketplace of "deeply discounted" common medications. That initial selection—which includes antibiotics and chemotherapy nausea treatment, among others—is expected to bring "several hundred thousand" in annual savings to CHS off the bat, and could grow as more drug purchases are approved, CHS said.
Further, the companies said that Cost Plus Drugs will work with manufacturers to source additional drugs as CHS identifies specific needs or savings opportunities.
“The benefits of this partnership are significant and include immediate savings on drugs frequently used in the hospital setting,” Lynn Simon, M.D., CHS president of healthcare innovation and chief medical officer, said in a statement. “Equally important, our collaboration is about strategically pursuing opportunities to address a wide variety of pharmaceutical-related issues affecting all U.S. hospitals. We have an opportunity to do things differently, and the Mark Cuban Cost Plus Drugs team is making very positive change possible.”
Cost Plus Drugs said it charges a flat 15% markup over the cost of drugs it provides through its Cost Plus Drugs Marketplace.
CHS is the first health system to directly purchase pharmaceuticals from Cost Plus Drugs. The companies unveiled their collaboration, which initially focused on high-demand generic injectibles, in March (see the original story below).
“A lot of healthcare organizations want a better, more innovative, and more cost-effective approach to drug purchasing," Alex Oshmyansky, M.D., CEO of Cost Plus Drugs, said in a statement.“Our partnership with CHS is proving that’s possible. We see unlimited potential to help U.S. hospitals, physicians, insurers and most importantly, the patients, who need access to affordable medications."
March 7
Mark Cuban's drug company inks first health system partnership to sell directly to Community Health Systems
Mark Cuban Cost Plus Drug Company has found its first national health system buyer for hospital drugs currently in short supply.
Franklin, Tennessee-based for-profit Community Health Systems has signed onto a partnership with the billionaire-backed manufacturer to purchase pharmaceuticals like epinephrine and norepinephrine for its affiliate hospitals in Texas and Pennsylvania. The products are often used in emergency departments and intensive care units, with epinephrine currently listed on the Food and Drug Administration’s list of ongoing drug shortages.
Though the collaboration is beginning with just two states, the companies said they “expect to scale the partnership in numerous and meaningful ways.”
“Our partnership with CHS will give them access to epinephrine and norepinephrine at a transparent cost plus price,” Cuban said in a release. “This is the start of what we know will be an amazing partnership that will reduce drug shortages and drug costs and enhance the care CHS hospitals provide for their patients."
CHS spans 71 hospital affiliates with about 12,000 beds across 15 states and recently reported $12.5 billion in 2023 net operating revenues. It, like other hospitals and health systems across the country, has disclosed rising pharmaceutical spending in recent years.
The companies’ announcement framed the deal as a long-term collaboration “to address critically important issues related to drug supply in the hospital setting.”
Beyond high costs or shortages, these issues can include large amounts of pharmaceutical waste and potential dosage errors when medications need to be measured at the bedside. Cost Plus Drugs can help CHS avoid these by allowing the hospitals “more flexible ordering opportunities” including alternative vial sizes that aren’t offered by other drug manufacturers, the organizations said.
“There are many opportunities for innovation in the healthcare industry, including rethinking, and even disrupting, the way providers purchase products and services,” Lynn Simon, M.D., president of healthcare innovation and chief medical officer at CHS, said in the announcement. “Our relationship with Mark Cuban Cost Plus Drug Company has the potential to generate significant advantages for our affiliated hospitals and for other forward-looking hospital organizations that also want to reduce costs, reduce waste, avoid drug shortages and improve patient care.”
Cost Plus Drug Company currently offers about 2,500 generic medications and works directly with drug manufacturers to bypass middlemen and lower prices. For consumers, the price of each drug includes a 15% markup as a profit margin, a $3 pharmacy handling fee and a $5 shipping fee. Cost Plus also transparently displays what it pays for its medicines.
The company has proven itself a disrupter on both generic drug pricing and the drug benefits market, where it currently works with at least four pharmacy benefit managers and supplanted major names like CVS Health’s Caremark with its inaugural payer deals.
Of note, the CHS partnership announcement comes just days after Cost Plus Drug Company kicked off manufacturing of generic sterile injectables at a new 22,000-square-foot, $11 million facility it built in Dallas. That plant is outfitted with aseptic robotic manufacturing lines and is slated to initially produce commercial batches of epinephrine and norepinephrine with pediatric chemotherapy products next in line.
During a roundtable discussion held this week at the White House, Cuban admitted that Cost Plus Drug Company is “not making money yet” but promised the business will eventually become self-sustainable.