Mark Cuban’s War On America’s $5 Trillion Healthcare Machine: ‘they Can’t React As Quickly’

Billionaire entrepreneur and investor Mark Cuban thinks America’s healthcare manufacture is broken, and he’s not mincing words astir it.

“No 1 looks astatine nan financial broadside of healthcare and says, ‘This is nan measurement it should work,’” Cuban said connected this week’s section of nan Equity podcast. “When you spell to nan expert and you get a medicine . . . you person nary thought what nan costs to you is going to be. You don’t cognize if you tin spend it aliases not.”

The erstwhile “Shark Tank” big and number proprietor of nan Dallas Mavericks hoops squad explained nan guidelines of nan problem: astir supplier prices coming are group by drugstore use managers (PBMs), aliases 3rd parties that negociate medicine supplier programs. Cuban said supplier prices are opaque by design.

That’s precisely why he launched Cost Plus Drugs successful 2022 — to propulsion backmost nan curtain connected supplier pricing, bring down costs to nan mean consumer, and disrupt nan accepted drugstore industry. 

“They value to market; we value based disconnected of cost,” he said. 

The quality is shocking. For example, a generic chemotherapy supplier mightiness costs thousands complete nan antagonistic astatine a pharmacy, whereas it mightiness costs “$21 from Cost Plus Drugs,” Cuban said. 

Cuban’s attack is vastly different from really narcotics are traditionally priced successful nan U.S. As its sanction suggests, Cost Plus Drugs sells meds straight to consumers astatine a transparent value – nan manufacturer’s cost, positive a 15% markup, positive a $5 drugstore fee, positive shipping. 

“And we’re adding nan expertise to prime it up successful a section pharmacy,” Cuban added.

To understand why Cuban’s exemplary is disruptive, it helps to cognize why narcotics costs truthful overmuch successful nan first place. The manufacture has defended its believe of overcharging for medicine successful nan U.S. – which is 1 of nan only high-income countries whose authorities doesn’t group aliases discuss supplier prices – by arguing that without nan inducement of precocious profits, companies couldn’t put nan billions of dollars needed to bring caller narcotics to market.

But critics reason that prices are group to maximize profit and aren’t straight tied to R&D costs. One 2021 study recovered that gross from nan apical 20 best-selling narcotics unsocial was capable for companies to wring a return from their R&D costs pinch billions near over. 

Cuban besides pointed retired different logic that supplier prices skyrocket successful nan U.S.: artificial shortages. “Believe it aliases not, successful this time and age, location are things for illustration pediatric crab drugs, Pitocin, sterile water, [and] this agelong database of narcotics I can’t moreover pronounce right, that spell successful short proviso because nan manufacturers want them to spell successful short supply, because that’s really they jack up nan price,” Cuban said.

While there’s constricted nonstop grounds of intentional profiteering, it is existent that during shortages, prices rise significantly.

His answer? Build his ain factory. Cuban’s has a manufacturing works successful Dallas that’s “all robotics driven.” 

“We created this mill wherever we tin move complete a caller supplier successful 4 hours and vessel it retired to hospitals,” he continued. “And truthful we’re starting to onslaught those shortages.”

While shipping narcotics to patients has razor-thin margins, different aspects of Cost Plus Drugs, for illustration supplier manufacturing, are much profitable and thief nan business activity toward profitability. Manufacturing is besides different measurement to situation nan supplier proviso chain.

But Cuban’s strategy goes beyond conscionable offering cheaper narcotics — he says he’s refusing to play by nan rules entirely. “Everybody was saying . . . you can’t conflict these large companies, nan security carriers, nan PBMs,” he said. “I’m like, ‘Well, I conscionable won’t activity pinch them. I’m not going to activity nan measurement they want to do it, because that’s not what’s champion aligned for patients.”

Even Amazon, Cuban noted, fell into this trap. The tech elephantine has collaborated pinch collaborated pinch PBMs done Amazon Pharmacy, but that puts nan large tech patient astatine a disadvantage because it’s still “beholden to PBMs.”

His proposal to founders trying to return down incumbents?

“Don’t beryllium limited connected them,” he said. “Because if I were 25 and starting this business, I astir apt would activity done nan drugstore use managers because that’s wherever nan money is. All of healthcare is fundamentally an arbitrage. How tin I conscionable get a mini percent of a $5 trillion marketplace done technology, pricing, immoderate it whitethorn be?”

“When I started out, personification told maine this: ‘When you tally pinch nan elephants, there’s nan speedy and nan dead,’” Cuban said. “You’ve sewage to beryllium quick, aliases you’re going to beryllium dead, and truthful you’ve sewage to beryllium lean, mean. You’ve sewage to beryllium capable to adapt. You’ve sewage to beryllium capable to zig and zag and ever look for ways to conscionable do better, because it’s nan full Innovator’s Dilemma point for [the incumbents], right? They’ve sewage to protect their bequest businesses, but they can’t move arsenic quickly. They can’t respond arsenic quickly, and truthful that’s ever going to springiness nan laminitis an edge.”