The Real Price of Healthcare with Mark Cuban
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When you look at healthcare, the first thing you think is we hate IT. The second thing you think is no one can figure out out. The third is it's OPEC.

You know how much you spend on health care, but you have no idea what you're spending IT on. You have no idea why IT cost, what IT cost. You know how much we spend on marketing and advertising? zero. Because transparency is the best sales person ever. Of all the businesses i've ever started in my entire life, this has been the easiest.

If you are an ava listener of the asic T E podcast, you'll know that we had mark cuban must like to discuss the opp health care industry and what he's doing to change IT with his company cost plus drugs. But since then, a lot of headway has been made, so we decided to bring mark back on in this episode recorded at our asic cn z american diamond M M M back in january.

Mark breakdown precisely why things are so complex and how much money is being left on the table, like how a drug that literally cost ten thousand dollars could be brought down to fifty, or even how he recommends companies have their very own health. R CIA vos, together with basic gensia general partner David olivet, mark also touches on other major topics that our country is facing, from education to ensuring widespread across the nation. Given that health care is one of the biggest industries in amErica at over four trillion dollars and roughly twenty percent of the country's GDP, IT should be no surprise.

That is also one of the most important chAllenges for solving. This is not one to miss. As a reminder, the content here is for informational purposes only, should not be taken as legal, business tax or element advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a six gene fund. Please note that asic ne and nzo hili ates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a extended t com slack disclosure.

Well, first of all, I want to thank you for being here. You've been an inspiration to counter entrepreneurs throughout the country and around the world, even a great supreme r yourself.

And I think we all know you in addition from the dallas market expert from shark tank, but you have a new mission and you have done something and tackled something that I think a lot of people feel like this OPEC inpenetrable industry, which is the healthcare industry, and everyone knows it's broken. Everyone knows it's got problems. I think a lot of people who have no idea how that works, you have G I fort, at least a part of the code. Tell us what you were doing with cos .

post drugs is twenty. I got a cold email from a radiologist, doctor alexa's mianzhu, and he was like, look, i've got this compounding pharmacy and denver. I want to build where we're going to take genre drugs that are short supply, manufacture them there.

And salem, i'm like you're thinking too small. Th, let me look at this industry and see if there's an opportunity, I think, that can be bigger. And when you look at healthcare, the first thing you think is we hate IT. The second thing you think is no one can figure out. The third is it's OPEC and death finites not transparent. So IT was a really simple leap to say, what if we created a company cost push drugs that come once we got that area that was the name, and we published our costs, we published our markup and we published our pricing list. So now when you go to cost plus drugs dot com, write that down cost plus drugs dot com, it's a good name .

and you put in the name .

of your medication. And we've got about twenty four hundred and fifty right now that numbers growing every day. The drugger come up and you'll see our cost.

You'll see that our markup is fifteen percent. See that if you buy male from us, you pay ten dollars for shipping and a pharmacy fiel feeds. We also have a retail network we will build in right now.

If you buy, there is nine dollars but the same Price. And by doing that, that's changing everything because think about what happens when you get a medication prescribed. You the doctor says, okay, you need this drug.

What's the next question? What pharmacy do you use is not here some option is it's not what is a cost or can you afford IT? It's always just here's the pharmacy.

So now of the sun, people started coming to us and realizing that they were getting ripped off. I think I can tell you story after a story. After a story, a friend of mine who was in a horrific car accident needed a drug called drugs adopt.

I had no idea what that was. And so i'm like, london. Let me look IT up.

He goes, i'm going to have to pay ten thousand dollars every three months. I just lost my insurance. Can you help me? Okay, let me look to see if we can Carry.

Okay, we can Carry. IT ended. Let me find out the Price.

Those three months, it'll cost you fifty box a month, crazy. And how can they get away with that is a question. Well, nobody knows any pricing.

Nobody knows any Better. And by publishing our pricing list now, researchers from harvard and vander build and other research organizations taking our Price list and comparing IT insane. Look, here are three urology drugs that, if cms would have purchased through cost plus, instead of current sources, would to save the government. Three point six billion dollars are here at nine heart medication, whatever IT may be. And so just transparent y is a game changer in this industry.

So you only sell in the consumers right now. Can you also sell to a government buyer?

Or i'm glad you ask that we just started cosplay s wholesale because what was happening is we had hospitals and others who couldn't buy at our pricing, at our retail pricing, and so now we're selling to them.

So explain a little bit to folks how because it's kind of crazy that it's something could cost ten thousand dollars previously in your selling for fifty box. How did the system get to this point of opacity where different hospitals pay for different Prices for different drugs? Most people just think that when the drug makers sell a drug, you just cost one Price. How did they get to be this system where all the Price variability, you even within a metro region, is so different.

how do we get there? You guys talk a lot about regulatory capture where we there's also something called scale capture. Think about for all of you who are entrepreneurs, if any of you self and sure, or for your ccfa self and sure, you know how much you spend on health care, but you have no idea what you're spending IT on.

You have no idea why IT cost, what IT cost, right? And the bms and the big insurance companies, they know that, they know that their big, and you don't truly understand the nature of your cost of your healthcare. And look, I was just as stupid, literally, like for my companies, we have about a thousand lives that we cover since I just sold a big part of one of them.

And for those thousand and seven hundred employees, I was paying thirty dollars a month per employee to an employee benefits manager. Am like, what do you do for me? And i've been working with this guy for twenty years.

What do you actually do for me? Well, everybody else gets a five percent increase. We keep you to a three percent increase. I, but what do you actually do for me? Nothing.

nothing cut out of the guy in office space that moves the paper from over here to over here.

Too much, right? So that's two million hours gone. I go to you with all you just cut out your employee benefits managers, you would save millions and that be your best fundraise you've ever done. Then I looked at my insurance companies and I said myself, and sure.

And then right around the same time, my son had something happened, is fourteen, and he was going to hospital on and my wife like, okay, i'll just get the insurance card and we'll go take him I like, no, no, don't use the insurance card. Take a credit card and when you get there, ask for a cash Price because I always looked IT up the insurance costs that they were in. Charge me, my insurance company that my employee benefits person supposedly had just negotiated a great rate.

Only a small increase, right, was going to charge me twenty two hundred dollars by paying with a credit card that was four hundred seventy five. And i'm serious just for your own companies that have yourself and sure, if you have your company like what is a breath or ever want to you build a cob card and just let them use that, you will save money. So we looked at our insurance and said my cost for a family of five for a year was twenty six to twenty nine thousand dollars year, which is kind of typical.

And we paid the whole thing, are employees and pay anything like i'm prepaying this to the insurance company in premiums, and they can even negotiate a good enough Price for me just walking with a credit card. So what did I do? I'm kicking to the curb.

So now all of son, i've got all this money and premiums that i'm not having to pay out. So we go to the local hospitals and provider networks, primary care, tell a health everybody. And we say, look, one of the chAllenges you have is you have to deal with three authorizations.

We only have seven hundred ploy es, the thousand lives. We're going to trust you because if we can't trust you, we're not going to do business within. We're going to edit you after a year.

Number two, right? A big part of your losses in your expenses in your overhead is, a, you have to have all these administrative people to deal with all these different networks that you have with the big insurance companies. And b, you're responsible for the finances of the copies of all of your employees here.

So if any of your employees have a cope and they go to the hospital, the hospital takes the AR risk, not you, they do. And we said to them, okay, we'll pay cash up front just like the whole credit card cash thing. What's our Price gonna? Now the typical network Price negotiated by the big insurance companies in two thousand and fifty to two hundred, seventy five percent of medical rates Price were negotiating right now eighty to one hundred percent of medicare.

Now that two hundred and fifty thousand five I was paying out of pocket is self insurance. So were you. So now we've walked in.

Now we're direct contracting across the board, and we were able to do this. And the third, the most important thing of all of this is we're telling all the provider networks that we're working with. We're transparent.

That's what we do. We're publishing every contract with every Price in every detail so that every smaller, medium or large business can copy exactly what we're doing. And we've filled millions of scripts, and we think we have seventeen percent at cost plus seventeen percent of the cash milder market.

And you know how much we spend on marketing and advertising zero, because transparency is the best sales person ever. When we start publishing all these contracts that we negotiated, your business is going to blow up. So now we're in the process of finishing all those negotiations.

And what we've done to the pharmacy side will do to the healthcare side as well. And for each and every one of you out there looking to raise money quickly, cut your pharmacy benefits manager, cut your big insurance company, if yourself. And sure, if you use a big three p bm, you're getting ripped off. So you ask a question, David, wire these Prices so desperate, because the big p bm.

you explain what A P bm is on. Pharmacy benefit manager OK.

because I think that's .

the terminal that most people don't know is part of that OPEC middleman and environment.

which is crazy, right? Because all of your drugs spend goes through a pharmacy benefit manager of pbn, and there are three of them that dominate the industry with eighty ninety percent market share. And you know what unique services they offer.

none more of the office space paper moving more right?

And initially, when they came in the being, they went to companies and said, look, we're going to negotiate the formulas because you don't want someone some new drugs you don't want. Okay, back then, maybe that that was worthwhile, but now they use that to say, we don't Carry that, right? So there's a biosimilars for humor, which is the highest revenue generating rug called you simmery that we sell.

Huma is about six eight thousand dolla month. You similies about seven hundred dollars a month, but they won't add you summary to their formula is because they don't want to use the revenue in the margin. So what do they do?

Instead, they take a chunk of that delta that they're keeping and they get rebates from the men. you. Rer, and they put part of IT in their pocket and part of IT in your pocket.

And so a lot of you in here are your cfs. Get this check from the p bms. thinking. All see, I negotiated a good deal now because that money should be coming direct back to you, but IT gets even worse.

The rebates that those of you are getting take, you know who pays for those rebates? You're oldest and sick I S. Employees because they're the ones that have the copies and they're the ones that have the most chronic illnesses and they're the ones that are subsidizing all those rebates.

So here you are, if you feel sure like I did, and these are all things I went through to figure out for my own companies, right? If you're using employee benefit manager, you're making a mistake. If you're using one of the big three insurance companies, you're making a mistake.

If you're using a big three p bm, you're making a mistake. One other thing else suggest, historically, health care costs have gone hr and a little bit of CFO. Now is the time for each and every company with over, let's just say, one hundred employees to bring in a health care CFO that's dedicated specifically.

So the two hundred, three hundred thousand dollars you pay that person, depending where you are, will be able to do all these things i've just talked about, because after your payroll, your biggest expense is probably healthcare and an inked and cheaper. And so by paying attention to the details of these things, you will save so much money. And more importantly, you will change the entire health care industry.

So when we all talk about changing the healthy care industry, how messed up IT is and how was off on, everybody hates that. You know, he's responsible for IT being a mess. We are not the government, not the big insurance companies, not the big p bms.

It's starting with me, my ignorance, your ignorance that keeps this business in business. If five of the fortune fifty companies walked away from the big three insurance companies in the big three p bms, they'd have to change their business models. And immediately, immediately, the entire health care system would change by having all those contracts that you sign.

The first line in the contracts is you cannot share this, you signed in nda, do not show to anybody. If you strike those and publish those contracts, you immediately change the entire industry. And you know what i'll happened.

As a result, cost to go down, not slowly, quickly. So we all can take responsibility for changing in the health care industry. And it's not a complicated industry of all the businesses i've ever started in my entire life.

This has been the easiest. That's crazy because he does seem very opie and know I think listening to if first of all, super messed up about the most vulnerable, the oldest patients being the ones bearing the brunt of the cost, they get passed on this rebates. That's just.

just crazy. Think but there is a wall street journal reporter or cnbc reporter sitting here somewhere. And if you're a big company, CEO or CF.

they're staring at you right now. Yeah, we've made every CEO in this room who has one hundred to one thousand players feel pretty dumb now about just paying that broker.

Well, I felt dumb. I mean, I mean, like I SAT there are nice.

Okay, now they ever come forward .

hire a healthcare CFO you and digg into the details because it's hard. Your core copenny as a CEO is not your healthcare business, but if you self ensure healthy care is your business.

So you say like this, not that complicated for business. I think that you're not giving yourself enough credit. I think that is a complicated it's very opake business may not be complicated.

It's very opic business. You just find all these from the middle, taking all this money and marking things up and making the pricing is non transparent as possible. But is there a role in the government? I did reading leading up to this IT does seem like there are a few very large pbs vertical. Ze, you just talked about you have kind of a scale mode, but is that something where the government should play a role and saying, hay, wait in at two hospitals and next two of their should have the same Price for the drugs with things like that, what role the government play in all this?

I just think the big pbs of big insurance companies that they often only each other or faster, smarter, and that the more you try to legislate IT, the more influences to have and the more captured they will have. That said, probably the only place that I would dig in and consider pushing for legislation is to protect independent pharmacies.

If you do business with any the big three beams or insurance companies, you are putting independent pharmacies out of business. Your grandma, your grandpa, your aunts, your uncles, right, that go to that same pharma acy for twenty years, that same pharmacy is struggling, struggling to stay in business. And so if you're dealing with those big three p bms, IT costs an independent pharmacy, probably twelve dollars, give or take on the location to fill a script, they're paying on fifty cents.

But IT gets worse, right for medicare, fail in medicare vantage fills. There's this thing called drag dir fees, right? And they're charging them these fees up front so that your gov or your eloquence, they're lose in ten and fifteen twenty dollars, thirty dollars every time they fill IT.

And so they're trying to send them to cvs is in the walGreen in the world so they don't have to fill IT. And you guys are helping to put him out of business. So from a legislative perspective, I would be fine. Was saying the minimum paid by any big three pb m that has more than next percent of market share is twelve dollars.

Do you think he talked with this healthier CFO?

Is that really reasonable for a CEO thousand personal company to really say i'm going to start calling the local hospitals in my area and negotiating my own rates? Is that really the model forward? Or is the new model going to emerge? What is the real recommendation for a CEO? And then what about someone's in a horrific car accident? They need long term care and insurance to as a role to play there.

So you're going to have reinsurance or catastrophic insurance for that, right? You the parameters to deal with those situations. And in terms of can you make IT a core business effectively going will be publishing everything we do.

And so you'll be able to copy what we do and use the same networks eeta. There are companies that already put together networks. There's a company called bev cap that's in the beard distribution business, and they put together their own network, and we basically are working with them and borrowing their network.

You can hire third party administrators, independent little charge you for transporting, completely transparent. I mean, just to show you how stupid we all are. Call your business is a lot of .

smart people in the room.

We're stupid, right? When he comes to health care, me first right flumped out right here, call your benefits consulting or your p bm or your insurance company and say, I want copies of all my claims for the last month, your employees, the claims, so you can see your cost.

You know what they won't given to you and if you really scream in out, we'll charge you and then they say it's really hard for us to put together, might take a couple months because they know the minute you see the cost and pricing for your medication or health care claims, you're going to know you're get ripped off and you can go somewhere else. Then when that happens that the company comes to costly s drugs and say, cost plus, can you work with this big three p bm? We're like, sure, but they won work with us.

So when he comes to dealing with the details, there are a ways to get through there. And that's why I pay two, three hundred thousand noise for a health care CFO. They will pay for themselves a hundred times over.

excEllent. You are a billionaire who started cost plus drugs. But do you have to be a billion aire to start a company like cost cost drugs? Yes, yes.

okay. So that I kind of thought that might be the case. And we look at space ex IT was started by ellan know he had to pour all the money new before he became SpaceX. There are some these business that are very hard to finance and the get go unless you come in with a big are there other businesses that you've looked out if you ve thought of you like, hey, look, you'd be great of another billionaire in the room maybe built .

that kind of company. Education comes first. I mean.

you have a plan for education.

I've got to deal with this first. But the whole idea of a creddle ecology being the driver of starting to not starting schools, ridiculous, because do we really pay attention to that anymore? I mean, we're not even necessarily requiring degrees any longer.

We care about soft skills and acknowledge. I gave a talk when time, and I asked people IT was a republican fund raiser thing. I said, how many of you have donated money to your on my mother and have a building in your name? Pretty much of your boy's hand went up.

I like your y tuition is going up because that's what colleagues do. And those buildings have to eat, eat, eat, eat, eat, eat, eat every year, and then they have to get replaced. And why do you need a sociology building and a business school building and a psychology school building? And they just ridiculous shit, right? And so I mean, they're just as right to be disrupted as anybody.

Totally agree. I know we as a firm, totally agree with that. And remember reading, the average GPA at harvard has gone up a four grade point in like the last fifteen years. And you know .

those kids are any smarter? No, no offensive .

to the harvard alarms least the reason ones.

Does anybody hire people from harvard anymore? I don't.

Yeah, I do not .

give me texas tech in.

People do real work in the end.

right? Okay.

I like watch here. Here we got a few minutes left. You've historically been I like there's like some kind of people being like actually a good school.

I promise the good news, they haven't been in the news at all and .

have been yeah yes, it's not not total free for the man.

No so like you .

have posted shark ting for sixteen years, fifteen, fifteen. This is the sixteen year. This is the fifteen, oh, fifteen year. Okay, wikipedia, something wrong.

It's wikipedia rock. shocking. I didn't know things .

were wrong on the internet, but it's one of the most important in america's, an iconic show at an inspiring show. Entrepreneurs, couple questions. What's one of your favorite moment from shark tank and the second parties? If you could change anything by the show.

what would you change? My favorite moments are whenever somebody from the middle of nowhere comes in. With an idea that just makes me think, why did I think of that and really want to invest and you just change someone's life. And the millions of people who are watching IT originally and then in all the ten zillion repays, they're getting inspired. That always makes me feel good and that's why I do the show. And then there's the the fact that that episode is gonna played in thousands of schools every week that inspires me as well in terms of what I change when someone walks in the door and says, hi, we're from harvard, I can .

guarantee you is that .

the producers to do that, we don't know who they are. We know nothing about them. We don't know who gets picked for the show when they walk into the carport in front of us.

They just tell us their name and that's we know. But when someone from the harbor MIT or stanford, there always are just there for the commercial. So we've got this business due to and we want six million dollars for one tenth of one percent of our company.

Oh no, we're really here and negotiate. We will give you point oo one six if you give us more cash. That's the stuff that we have to change because that just the lose to show yeah.

there's not team much .

of that thankfully, what we've learned right? Harvard and get up.

I like this. I like this sponsor looking on a highway. Okay, so when you look at everything going on, the world art change to me, is this a truly american phonenet actually saw the friend to replicate other countries.

IT doesn't out that well. He works out OK canada. Other places like they try to do the .

really these other places.

but amErica is really a special place. What are the things that you'd love to see, whether it's in the government side or with individuals or with corporations? We really like to see amErica step up and and make sure that we need to be the habit of innovation.

Entrepreneurs think one thing that's truly missing from administration and previous administrations is that we don't celebrate entrepreneurship enough. There's programs from the small business administration that are fine, but there's nobody saying, look, what's the one thing that makes this country different than every other country and that's the american dream.

I've never talked to somebody, have not had them say at some level and obviously a little bit because it's me, but that, hey, I had this idea. Every single person in this country at some point thinks to themselves, hey, i've got this idea and they say to a friend, what do you think? Then they google.

Nobody else is doing that. And then most people stop. But it's the people in this room that say, fuck IT, let's go right? And those are what makes this country different. I think we really need to celebrate them more. And I think we're start to see more growth in middle amErica for that and more celebration there. And it's not even about okay, let's define more money for them because i'm a big believer that the best equity is sweat equity and that you don't have to start big. You can start small and by learning that whole Price says a small lunch and or you can fear out how to become a bigger launching .

or the bigger company. Let's go. Let's go. So thank you, mark. You on.

Now if you have made IT this far, don't forget that you can get an inside look into A C, C american, danny IT, at a exclusive com flash A D summit. There you can catch several of the exclusive stage talks during policymakers, electively sector, advanced thin fix or governor west, more of maryland, plus the founders from companies like android and coin base, all building toward american dynamism. Again, you can find all the above at a six cy com flash A D summer, and one could a link in the show.