How are they able to offer generic brands of prescription drugs at such low prices? What do they do differently from traditional pharmacies to offer the drugs so incredibly cheap?
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This is a complicated topic, but I will try to keep this as simple as possible
Drug prices in the US are heavily manipulated by drug companies. For most drugs, the company that makes it has an ‘advertised’ price (Called AWP in pharmacy terms). This is a price that the drug company has made up, and it may have nothing to do with a real price the drug is sold for. The drug company then sells drugs to a wholesaler for a ‘secret’ price. Wholesalers operate warehouses and storage around the country, and when a pharmacy (like Walgreens or CVS) needs a drug to fill a prescription, they buy it from a wholesaler for another secret price. The pharmacy then sells it to the patient based on the ‘advertised’ price of the drug. The difference between the secret price and the advertised price is how the pharmacy makes their money.
People without insurance usually have to pay the full advertised price. For people with insurance, the insurance knows that the prices are different, and negotiates with the pharmacy for a large discount, so their members don’t get charged as much as people without insurance.
The problem is, for many drugs out there the ‘advertised’ price of the drug and the ‘secret’ price of the drug have nothing to do with each other. In some cases the advertised price may be hundreds, or even thousands of times higher than the secret price the pharmacy is actually buying it for. For example, the drug Ondansetron (a common nausea medication) has an advertised price of around $30/pill, but the secret price pharmacies buy it for is actually known to be less than $0.10/pill.
What Cuban’s pharmacy does is to sell drugs for the secret price they purchased them for with no markup. They then charge a flat fee on top of that, which is how they make their money to pay their staff and run their pharmacy. However, not all drugs (especially new brand name drugs) have secret prices and advertised prices that are all that different. So Cuban’s pharmacy can’t offer a huge discount on those, like they can with many generic drugs. Generic drugs often have very different secret and advertised prices. In the industry this is called ‘pass through’ pricing.
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