Entrepreneur Mark Cuban discusses the importance of transparency in health care and how Cost Plus Drugs is disrupting the market by creating accessible medications for those who need it. How can health care extend transparency for the greater good? How do pharmacy benefit managers affect the price of your prescriptions? Mark explains the current cost structure inefficiencies and gives an overview of his vision for improvement.

Here are four takeaways from the conversation with Mark Cuban:

1. Transparency in Drug Pricing

Mark Cuban emphasizes the importance of transparency in the pharmaceutical industry. By creating Cost Plus Drugs, he aims to disrupt the market by offering a transparent pricing model, which includes a consistent markup and visible cost structure, making medications more affordable.

2. Challenges with Pharmacy Benefit Managers (PBMs)

The complex role of PBMs in the healthcare system, highlighting how their practices, such as spread pricing and rebate games, contribute to inefficiencies and high costs. He advocates for a more transparent and fair system that benefits both patients and providers.

3. Innovative Approaches to Healthcare

Cuban’s involvement in healthcare stems from a desire to innovate and improve patient outcomes. His approach includes leveraging technology and business acumen to address systemic issues, such as drug shortages and pricing inefficiencies.

4. Future Plans and Expansion

Cuban hints at future expansions, including the introduction of branded medications and the development of Cost Plus Wellness, which aims to provide direct contracts and transparent pricing in healthcare services, further challenging the status quo.

Transcript

Mark Cuban:
It all comes down to this: we don’t trust you. You guys are idiots, we don’t trust you. And that’s the genesis of PBMs.

Dr. Ned Palmer:
Dr. Jerkins! How’s it going?

Dr. Michael Jerkins:
Doing great, doing great. Flying high off our guest today—I’m excited for it. Coming off the Olympics, we thought it’d be appropriate to bring on one of the most legendary sports team owners of our era. For most of my life, I haven’t known owners to represent such a presence in American culture the way he does.

NP:
Wait, who’s our guest?

MJ:
Our guest today is the one and only Mark Cuban. We’re really excited to have him join us. Spoiler alert—that’ll be the show title. What we’ll dive into in this episode is how he’s innovating and disrupting healthcare.

NP:
It’ll be in the show title.

MJ:
We love new ideas and innovation within healthcare. The basic question is: what would make things better for patients? Mark is really thinking differently about that.

I’m excited to talk to him about so many things because of the breadth of his career. He comes from a programming and tech background, became a sports mogul, and now is centrally positioned in healthcare debates. As a business owner, we’ll discuss Cost Plus Drugs and our experiences with it, as well as what he’s doing from a policy standpoint.

Healthcare is massive, and it’s hard to fix from any one direction. Tackling it requires a multi-dimensional approach. I’m really excited to hear his thoughts after spending the last six to ten years immersed in it.

NP:
I think people don’t want to listen to us anymore—we should probably cut to the interview.

MJ:
I think people always want a couple more minutes of us. We’re like the amuse-bouche.

MJ:
Is that a good segue? Let’s get to the interview with Mark Cuban. Mark is an entrepreneur, TV star, NBA owner, and now a healthcare disruptor, bringing innovative ideas on how to make things better for patients. Mark Cuban, welcome to The Podcast for Doctors (By Doctors).

MC:
Thanks for having me, guys. I appreciate it.

MJ:
Excellent. Well, let’s jump in. A lot of people know you for many reasons, but healthcare might be a new one. How did you get involved and interested in healthcare and innovation?

MC:
Around 2017, when the Trump administration came in, they were talking about getting rid of the ACA. Some of my friends involved with it admitted they wanted to get rid of it but didn’t know what to replace it with. Out of fear, I started digging into healthcare, working on different projects, and trying to get up to speed.

Then around late 2018 or 2019, I got a cold email from Dr. Alex Oshmyansky. He said he was starting a compounding pharmacy in Denver to make generics on the FDA’s shortage list. They wanted to help kids who couldn’t get drugs for pediatric cancer.

I thought that was great, but I asked: is there something bigger? That was right when Martin Shkreli was getting sentenced for jacking up the price of Daraprim. So I thought, if he can hike Daraprim to $7,500, then this is not an efficient market. My first idea was to buy a year’s supply of Daraprim to undercut him—but he already controlled the supply.

So I thought, okay, this is a mess. Let’s start with generics, but differently. We set up a website, and what made it different was transparency. The only reason you get crazy pricing is because there’s zero transparency.

You guys know this: when you prescribe a medication, the first question is “What pharmacy do you use? Where do you want me to send this?” There’s rarely any discussion about the economics. The presumption is that people have employer-based insurance. If they don’t, it’s a stress factor.

So we bought the URL costplusdrugs.com and launched with a simple model: show our costs, add a standard 15% markup, a small pharmacist fee, and shipping. That’s it. Prices were consistent and transparent—and in most cases, far lower than what people were paying.

We launched with about 115 generics on January 19, 2022. Just me and my big mouth talking about it. The response was great, but we didn’t have enough drugs. Our challenge was getting manufacturers to trust us. That’s why I put my name on it—I’d never done that before. But I wanted manufacturers to know we were serious.

Using my platform, the word spread, which gave comfort to manufacturers, and they started selling us more. We eventually added branded medications and now have about 2,500 SKUs, serving millions of prescriptions.

The biggest impact wasn’t just transparent pricing, but publishing a price list. Before us, there was no commercial drug price list to compare to. Researchers started using ours and showing massive savings if Medicare purchased at our prices—billions saved across drug categories.

And here’s the kicker: we don’t spend a penny on advertising. Not one. Patients tell each other, share in Facebook groups, and tell their doctors. Doctors prescribe to more patients, and the cycle continues.

Savings have been huge. For example, a friend lost insurance and needed Draxidopa—it was $10,000 every three months. Our price? $64 a month. The savings are life-changing.

And of course, word spread quickly with generics like Cialis and Viagra. When I told my friends you could buy 90 Tadalafil for less than a bag of M&Ms, well—let’s just say their wives thanked me. Now there are a lot of happy couples with a big bowl of what used to be M&Ms next to their bed.

NP:
Sorry. And literally, you’re probably approaching 10% of the cash generic Cialis and Tadalafil market. That’s insane.

MJ:
That’s incredible. We’ll maybe pause the visuals there and not take that bit any deeper. There are a million channels to explore here, but you ended by talking about growth—from the pharmacy side, manufacturing side, and customer side. What have been some of the biggest challenges with scale?

MC:
At first, the challenge was simply keeping up with growth—partnering with pharmacies that could handle the scale. We’ve had to slow things down for certain medications because it’s hard to find a pharmacy that can scale with us. But the bigger challenge has been dealing with brand medications.

The minute we start talking to a manufacturer, one of the big three PBMs will say to them, “If you do business with Cost Plus and they sell like they’ve been selling, we’ll remove you from formularies or de-emphasize you, putting a competitor up front.” They won’t say that out loud, but that’s what happens. That’s been our greatest challenge, though we’re finally working around it.

NP:
They’ll fight you.

MC:
Exactly. We were originally adamant that we’d only work on a net-cost basis. Meaning if the net after rebate for a brand drug was $100, we’d only pay $100 and mark it up 15%, rather than using the rebate-style approach. But we’ve recently changed that, so you’ll see us aggressively adding brands over the next year.

MJ:
That’s incredible. I want to pause for a second and talk PBMs—Pharmacy Benefit Managers. They’re well known to players in the space like yourself, but very poorly understood by most doctors. They’re like the unpleasant, invisible hand of the market, driving costs with rebate programs. Could you give us the Mark Cuban rundown on PBMs, how they interface with your business, and frankly, who the big three are?

MC:
Sure. Let’s start with the supply chain. Say you prescribe a medication. Whether it’s our partner pharmacy, a local pharmacy, or a big chain like Walgreens, they first need that medication in stock. Pharmacies buy from wholesalers—usually one of the big three—who sell at WAC minus about 7%.

For example, let’s say Eliquis has a retail price of $600. With a 10% discount, the pharmacy pays $540. If a patient has no insurance, they walk in and pay $600, and the pharmacy makes $60. If the patient does have insurance, they hand over their insurance card, and here’s where PBMs step in.

The PBM processes the claim and negotiates with manufacturers—usually brand manufacturers like with Eliquis. They say, “Retail is $600, but if we put you on our formulary and emphasize Eliquis over other blood thinners, you’ll get more prescriptions. In exchange, give us an 80% discount.” So now they’re paying $120.

Then they go to the employer and say, “Great news—we got you 50% off! You only pay $300.” The difference between what they actually pay ($120) and what they charge the employer ($300) is called spread pricing. The games PBMs play with spread pricing and rebates are the root of all the animosity toward them.

But wait—there’s more. Before Cost Plus Drugs, I dealt with an insurer connected to a PBM. We wanted claims data to analyze costs. But PBMs won’t share it. Think about the chain of custody: you write the script, pharmacy fills it, PBM processes it. For HIPAA reasons, I don’t want individual data, but I do want aggregate claims data to understand employee health, wellness programs, GLP-1 use, etc. PBMs won’t provide it.

Not only that—I’m not even allowed, by contract, to talk directly with manufacturers like Lilly or Novo about GLP-1 programs. PBMs insert themselves and control everything. Three PBMs control over 80% of the market; six control 92%. The rest are smaller “pass-through” PBMs, which actually pass along the full rebate and share data.

Take Humira, for example. Retail is around $8,800 a month. There are biosimilars available. Big PBMs prefer biosimilars they control, priced just under Humira’s retail but with huge rebates—so they can tell employers, “We got you 50% off!” But a biosimilar like Yusimry, which Cost Plus carries, is only $594 a month. Pass-through PBMs will put Yusimry on formularies; big PBMs will not, because they want to keep their spread.

So you as doctors face this: you want to prescribe Yusimry through Cost Plus to save patients money, but the insurer says, “Not on formulary.” Why? Because the PBM, which either owns or is owned by one of the big three, keeps the spread.

It gets worse. Large employers—say with 50,000 covered lives—are savvy. They demand 100% of rebates. PBMs say, “Fine.” But then they set up something called a GPO, or rebate aggregator, often overseas in places like Japan or Ireland. The GPO negotiates the big rebate, say 80%. Then the PBM tells the employer, “Here’s 100% of the rebate we received—50%.” Technically true, but misleading, because they own the GPO. They don’t disclose that.

And it gets worse still. Manufacturers know this is a ripoff, but they’re terrified of being removed from formularies. PBMs can even charge manufacturers fees just to access data—data manufacturers desperately need to generate the best clinical evidence for prescribers.

MC:
PBMs don’t get full data on all their claims, so it’s a mess. But wait, it gets worse. Just when you think it can’t get worse—it does.

You may have noticed that a lot of smaller pharmacies are going out of business across the country. Here’s why. Remember when I said the pharmacy buys a brand medication like Eliquis from a wholesaler, maybe at 10% off? Well, when you prescribe a brand and send it to a local pharmacy, that pharmacy has to get reimbursed by the PBM. The PBM collects money from the employer, and the patient might pay a copay or nothing at all.

So the pharmacist dispenses a drug they just paid $540 for, expecting reimbursement. But the PBM doesn’t reimburse the full $540. They might reimburse $520 or $530. If it’s a really expensive drug like a GLP-1, they might short them by over $100. And then they audit them afterward with these things called DIR fees and take even more back.

MC:
So when people talk about hating PBMs, now you understand why. That alone could be an entire podcast episode. But in short—that’s why so many people hate PBMs, and why you do too.

The same system plays out on the healthcare side, since they’re integrated with the same big insurers. The spread pricing you see in-network versus out-of-network? That’s PBMs playing games with algorithms.

That’s why we’re creating a whole other company called Cost Plus Wellness. We’ll do direct contracts and publish them so everyone—including doctors—can see exactly what’s going on.

MJ:
That’s amazing. Transparency is such a big deal. Honestly, when I’m seeing 20–30 patients a day, juggling calls, and trying to deliver care efficiently, it’s almost impossible to step back and navigate prior authorizations, pharmacy access, and pricing. The system is so inefficient.

MC:
Exactly. And it all stems from lack of transparency. From your side, it’s a hassle when something isn’t on formulary or requires step therapy. That’s basically the system saying, “We don’t trust you.” And the root of that distrust is PBMs.

When you work with self-insured companies, encourage them to use a pass-through PBM. With those, the employer and you can set the formulary together. You won’t be forced into step therapy. And interestingly, there are fewer prior authorizations now because PBMs want you to prescribe more—they profit from rebates.

MJ:
That’s crazy. Can you talk a little more about Cost Plus Wellness?

MC:
Sure. First, know this: all your electronic prescribing software includes Mark Cuban Cost Plus Drugs. You can prescribe through us directly. It’s easy. Just type “Mark Cuban Cost Plus Drugs” into the pharmacy search box and our formulary will appear.

You can even tell patients in the waiting room to go to costplusdrugs.com and check pricing themselves. It’s that simple.

MJ:
I literally do that in the room with patients, especially in places with affordability or access issues. I’ll pull up Cost Plus Drugs on my phone and go over options. A few years ago, for example, with colchicine—suddenly it got very expensive after FDA approval. Your company provided an affordable alternative.

MC:
Exactly. And know this—when our price goes down, we pass it through. If you follow @CostPlusDrugs on Twitter, you’ll see we announce price decreases almost every weekday. As our volume grows, our costs drop, and so do our prices. So if you prescribed something through us before, it’s probably cheaper now.

MJ:
That’s incredible. Colchicine has been around for thousands of years, and to see a company patent it and drive up costs was heartbreaking. It’s great to have affordable access again.

That was a fantastic first half of our conversation with Mark Cuban. Ned, I think we both learned more about PBMs and pharmacy economics than we ever expected. I may need to rewatch this and sketch a diagram just to fully grasp it.

NP:
Agreed. We’ll probably need detailed show notes, maybe even a glossary of acronyms. Mark is passionate and clearly ahead of the curve, so we’ll work to break it down for our listeners. Having him on was incredibly valuable for our community.

MJ:
Absolutely. Stay tuned for the next episode, where we’ll dive into healthcare policy, even a little politics and sports.

NP:
And since we’re recording this just two days after the Olympic closing concert in LA with Snoop Dogg and Dr. Dre performing The Next Episode, I’m especially looking forward to the connection here.

MJ:

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