Mark Cuban's making your meds cheaper

Not all business leaders are in the public eye so often that they become a household name, but whether you follow professional basketball, are a fan of reality TV, or simply watch the nightly news, no doubt you’re familiar with Mark Cuban. As the owner of the Dallas Mavericks and co-host of ABC reality series Shark Tank — with a range of other business endeavors — this serial billionaire entrepreneur is not shy about taking the mic. 

Mark has been a guest on This is Working before. In the past, he’s offered up advice for business owners. This time he sat down with me, not just to dish out his trade secrets, but to talk about his completely new endeavor. Earlier this year, he took on big pharma with the launch of Mark Cuban Cost Plus Drug Company. 

There’s a lot of talk about the inefficiencies of the healthcare industry and pharmaceutical distribution plays a big role in that. Mark is determined to fix one part of the system: the sky high price for prescription drugs. How? By removing the middleman. He buys directly from manufacturers (and, soon, will be one himself — more on that below) and then charges a transparent, low set of fixed fees on top.

Mark developed the company with CEO Alex Oshmyansky, a radiologist who cold emailed Mark four years ago with the idea after seeing the sometimes fatal impact that astronomical drug prices had on his patients. Since then, they’ve been forging ahead with their radically simple plan to break down the barriers that stop Americans from getting reasonably priced medications. The system they’re fighting is convoluted, so for this week’s This is Working, Mark took the time to explain to me how it all works.

You can find the episode on Apple, Spotify or wherever you listen to your podcasts. Or just click here:

Here are some highlights of our conversation:

On pharmaceutical gatekeepers and how it all works

“The pharmaceutical industry has become very vertically integrated via acquisitions. So you have insurance companies that own hospital systems and different doctor care systems, and they also own retail pharmacies, and they also own these things called pharmacy benefit managers and pharmacy benefit managers are effectively — and not all, I don't want to demean every single pharmacy benefit manager — but many of the biggest that are owned in these vertically integrated companies have really gotten to a process where they just distort the pricing. So one, they act as gatekeepers. So they'll go to a hospital system and say, ‘Look, you know, you don't want to have to go and negotiate with all these distributors and manufacturers for all your drugs. Let us do it for you.’ And they're like, ‘Fine. You could probably get it cheaper than I can.’ And so then they go out and negotiate the prices and then from there, that's where the gamesmanship starts.

So…they'll say to the manufacturer, ‘I control access to this hospital and this insurance company. And if you want them to include your drug and not your competitor’s drugs, here are certain things that you need to do. You need to jack up your list price so that it's not really correlated to your costs. Because the higher the list price of the drug, when some of the government programs pay an amount, that's just a discount from the retail price, we'll both be able to make more.’ And they go along with it. 

Then the second thing they do is the pharmacy benefit manager says, ‘You know, I control access to all these companies, the provider, and the insurance companies and the pharmacies that will fill the patient's orders, that costs me a lot of money. Why don't you rebate me a percentage of sales so that I can support all my overhead?’ And the manufacturers do. So if you add in rebates, you add in all these other requirements, the high retail pricing, that allows the pharmacy benefit managers to then say to the hospitals and providers, ‘Look, you know, our costs are a little bit higher than we expected. We're going to charge a little bit more…’ And that distorts the price and jacks up the price at the retail pharmacy when patients go to pick up their drugs.”

On helping marginalized communities

“One of the ways we choose the drugs that we've gone after first are based off the equity behind the drugs, meaning what's the population that tends to use them and is unable to afford them. You know, the whole underpinning of doing this is recognizing that too many people have to make a decision between the rent, food and medication, and that should never happen in the United States of America or anywhere in the world. And so we really take into account underserved and underprivileged communities and the equity behind their access to drugs and the first drugs that we went after and we'll continue to do so. But the bottom line is we've really gotten our prices so low that for 99% of the people who use us, we're going to be cheaper than their copay… Our mission is very simple. We want to be the low cost drug provider for every drug we sell. Period. End of story.” 

On how he ensures the company will never lose focus

“You're not going to see bells and whistles. You're not going to see a telehealth option. You're not going to see a blog post by some world renowned doctor. It's just going to be the basics. 

“My goal is not to maximize profits. My goal is to maximize impact. My goal is to disrupt the pharmaceutical industry as much as possible. My goal is to, as I said, be the low cost provider. But to do it with as little government intervention — if any. By doing it as a public benefit corporation, we can still be profitable knowing that we're going to reinvest those profits into adding more drugs, expanding manufacturing facilities so that we can lower the pricing of the drugs that we sell… We didn't take on any investors. I put up all the money myself, so I don't have any obligation to anybody other than my customers.”

On fitting in within the industry

“We're not looking to fit in. And that's one of the challenges that some of these other companies that offer lower costs on drugs have fallen into, they're trying to work within the system. Which is fine. And I understand it completely because it's super, super expensive not to work within that system. You can burn through a whole lot of money very quickly like we have. That's one of the reasons there hasn't been a company like our start up before, because it's very hard to meet those two goals - having the lowest possible cost and making money, or maximizing profitability at the same time. “

On how he chose the Costplus name

“I'm a big fan of one-inch names. You know, my first company was MicroSolutions. We did microcomputer software and integration. Second company was Audionet. And then when we started streaming and nobody was, we had to make it a one word and then it became Broadcast.com. Then the world's first all high-definition TV network: that was HDNet. And so, probably if I could have named the Dallas Mavericks, it would have been Dallas Basketball Team. But the whole idea with Cost Plus Drugs is No 1, to make it very simple to understand. And I put my name on it — and it's the only company I have my name on — because I don't want companies to be able to dismiss it as, ‘Oh, it's just some investment that he has.’ Or if somebody was unsure if I was committed to the company, being able to tell them: ‘Look, you know, not only have I invested a lot of money, but this has my name on it.’ So that tells you how serious I am.” 

 On building a manufacturing plant in Dallas and creating jobs

“If the goal is to be the low cost provider of drugs, then manufacturing makes sense because the technology has evolved. It very much was a hands-on assembly line type of business. And now with new robotics technology, we're going to be able to push that cost down. And so we've invested $11 million to start. We have room to expand. Eighty two jobs to start. We have room to expand, and that's only in place that doesn't include the robotics monitoring and programming and software and all the related jobs that come with it.”

On why Cuban thinks aspiring entrepreneurs shouldn’t focus on NFTs or crypto, but on DAOs

“The hard part of crypto is separating the signal from the noise. You know, the speculation on NFT. That's, you know, that's fun. That's interesting. You know, having a Bored Ape or talking about Bored Apes, you can have a lot of fun, but it's just collectibles.

“And so there's a lot of noise there, but you know, the NFTs are really a proof of concept for what's called smart contracts… And these things called decentralized autonomous organizations, or DAOs is a business format that I think opens up a lot of doors to give you the best of capitalism and entrepreneurship, along with the best of progressivism and employee ownership. And while there's a long way to go with it, I think if I was, you know, 18, 19, 20, 21, any age for that matter, and looking for new ways to compete, I wouldn't be thinking of a new token. I wouldn't be thinking of a new NFT marketplace. I wouldn't be thinking of a new defi host or hub. I would be thinking of new ways to take existing business processes and apply smart contracts to them and potentially DAOs to be able to compete with the incumbents. But just like fintech had a significant impact on how banks do their work, I think crypto is going to have the same type of impact on business processes across the board. 

“And then the other thing that I would mention is artificial intelligence. Where we're at right now is there's two types of companies in this world: There's companies who are great at AI and everybody else. And if you're really going to get ahead and scale to be very, very big, you need to be good at AI. 

“You don't need it to start a business. You don't need it to compete with a small business, but if you're going to get big and you want to compete with the behemoths, you are going to have to be good at AI.”

On how to finding opportunities

 “Wherever I see an industry doing things the way it's always been done, there's a huge opportunity there. And that's what I saw with the pharmaceutical industry. You know, they became so entrenched in how they did business or how they're doing business. That's just expanded our opportunities significantly with costplusdrugs.com.

“And the same thing is applied with AI. If you look at the top 10 market cap companies on the stock market in the United States, None of them are great at AI. The 10th is Berkshire Hathaway, and they've got Warren Buffett. So that speaks for itself. 

“But it's not like I took AI in college. I had to teach myself anything that I knew about AI and going on YouTube, and doing introductions on neural networks, taking a Python class, even if it's just an introductory, doing some tutorials … those are the types of things where it's just a matter of putting in the time. You don't have to be some advanced program or a data scientist to learn these things… So if you put in the time, you can learn them, and give yourself a competitive advantage.”