Mark Cuban is a man on a mission — to disrupt the pharmaceutical industry.
Specifically, Cuban, the billionaire best known for his past role on the TV show “Shark Tank” and his minority stake in the Dallas Mavericks, is seeking to disrupt the middlemen known as pharmacy benefit managers. He’s done that in part with the Mark Cuban Cost Plus Drug Company, which he launched in 2021 and which he says is a cheaper alternative to traditional PBMs. But he’s also been on something of a speaking tour lately, showing up, among other places, on the campaign trail to rally support for Vice President Kamala Harris.
Cuban recently joined STAT’s Torie Bosch and Matthew Herper on the First Opinion Podcast to discuss his views on PBMs and the rest of the health care system. The below transcript of the conversation has been edited for length and clarity.
For audio and video of the conversation, click here.
Bosch: I’d like to start, Mark, by asking you something very basic: If you have to give a two-sentence explanation of Cost Plus Drugs to somebody who just does not understand the bigger issues, how do you do that?
Cuban: When you go to the doctor, you need a prescription. They tell you, you need this drug. What’s the next thing they say to you? What pharmacy do you use? And if you’re cash pay or [on] a high-deductible [plan], your heart immediately starts to beat faster because you don’t know what that price is going to be. If you have insurance from an employer or a low-deductible plan, say, from the ACA [Affordable Care Act], then it’s not really a problem for you. But if your employer pays for your insurance or your medications, it’s a problem for them, because they don’t know what they’re paying for that medication, either.
So in both cases, there is no transparency on pricing. And so now you can go to Costplusdrugs.com, put in the name of the medication that’s prescribed to you, while you’re in the doctor’s office, and this happens all the time, and look to see what our price is, and then you can make the determination. Is this cheaper than my deductible? If I’m cash pay, now I know what it’s going to cost me. And if I’m an employer, now I know what it’s going to cost me. And so that’s the value of Cost Plus Drugs. And the net result of that is, where there is a lot of really insane pricing in the pharmaceutical industry, particularly with what they call specialty generics … you might be able to realize hundreds of dollars, if not thousands of dollars, per month in savings.
Herper: So a lot of the drugs you’re focusing on, all the drugs you’re focusing on, I think, are generics and expensive ones….
Cuban: They’re not all generics. We’re up to 74 brand-name drugs, and that’s growing by the day.
Herper: Let’s get back to that. But for these original ones … the original example I think you guys used a lot, was Gleevec, which is one of the best cancer drugs ever. And the generic can be made cheaply available, but people are having to pay a couple thousand dollars….
[People are] literally saving thousands of dollars a month.
But you’ve been talking a bit lately about the lessons for the larger system here, including the branded drugs. And you have some thoughts about the pharmacy benefit managers in general. Give us a quick sketch of what the whole system should look like, given what you’ve learned.
Cuban: Right now, there are intermediaries called pharmacy benefit managers, and their mission in life is supposed to be negotiating with manufacturers, because they’re big and they can get better pricing. But they like not only being big, but getting bigger. And what they’ve done is they’ve introduced their own intermediaries, subsidiaries, and affiliated companies that they buy from and do intercompany transfers with, which puts them in a position to be able to increase the price of medications when they get to you.
So when I mentioned earlier about the fact that you don’t know what the price you’ll pay is when you go to the pharmacy, a big part of that is because there’s a pharmacy benefit manager as the intermediary between you and the price paid, and very often they set the pricing. And that’s particularly the case with corporations, corporations that self insure, and cover 165 million employees in this country. They negotiate with the PBMs to get what they believe is the best price.
So, for your example, for generic Gleevec, they might negotiate a rebate to be paid to them and not actually know what their net price is. And so, effectively, because of these intermediaries called pharmacy benefit managers, nobody knows what the price they’re going to pay for a medication is, and when they do find out, they often come to realize that it’s a very inflated price, with them keeping what’s called a spread in their own bank account.
Herper: It used to be that people paid a deductible and you had a drug benefit and a lot of your costs were covered. That’s no longer true for, I think, a large number of people. It used to be that the rebates were… you could say they were going to bring down your costs.
Cuban: Right, they were passed through. And now, you know, those big PBMs, the intermediaries handle about 85%, give or take, of the prescriptions that are filled in this country. So that other 15% is handled by companies that are called pass-through PBMs. So there is a market there for PBMs that know how to do a good job. It’s just trying to get more of them to be used by the federal government, the states, and by employers.
Herper: There’s also the problem with these PBMs that it’s possible to actually push the list price of the drug higher and higher. The PBM wants the rebate. The manufacturer just raises the price. It’s kind of what happened with EpiPen and insulin, again and again.
Cuban: Exactly. The patient’s interest and the interest of these intermediaries, the PBMs, are not aligned. The higher the list price, the more money that the PBM makes in rebates from the manufacturers.
Herper: But doesn’t somebody have to negotiate with pharma? Someone has to tell Pfizer or Novartis or AstraZeneca, we’re not going to pay that much, right?
Cuban: Yes. I’ve sat in groups of CEOs and HR people and CFOs, and I ask a very simple question: What is the one thing that one of the biggest PBMs do for you that a smaller pass-through PBM couldn’t do? Anybody raise their hand? Never, because there isn’t any one thing that those big PBMs can do that’s differentiated or unique from the smaller pass-through PBMs.
So while somebody has to do the negotiation with the manufacturer, it’s the fact that these biggest PBMs are leveraging their scale to not only negotiate a better deal with the manufacturers, but not pass through that pricing to employers and payers, even if it’s a patient that’s paying. And as a result, you get this wild mispricing of medications, which is where Cost Plus Drugs came in.
Probably one of the most impactful things that we’ve done, Matthew, is we published our price list. And so now for the 2,500 drugs that we carry, if you want to see what we sell Imatinib for, versus what you would pay at your pharmacy, or versus, if you’re an employer, if you can get the price, what you pay, now you have a reference price.
Bosch: I think largely because of the work you’ve been doing, I think people increasingly understand that even if they don’t know exactly how PBMs work, they understand that they are a middleman and increasingly being blamed for why everything is so expensive. But I sometimes wonder if the discussion is maybe going a little too far. Last year, I ran a First Opinion here on STAT by Josh Wenzell, a family medicine specialist from Ohio, who argued, and I quote, ‘Vilification of PBMs inadvertently aids Big Pharma by diverting attention from the real issues.’ And Dr. Wenzell says that those real issues are how Big Pharma companies keep generics out of the market and drive up prices. What would you say about that?
Cuban: Apples and oranges. So the issue of patents is real, right? Evergreening a patent is a problem, right? Doing these minimal extensions to try to get it is a problem. And so the pharmacies certainly are culpable for that, but PBMs do nothing to combat that. Nothing at all. That’s a legislative issue, and people are dealing with that. In terms of the pricing — it’s all PBMs, you know? And so two things can be true at once — that the pharmas are not doing the right thing and extending patents, and that PBMs are ripping people off.
Herper: So what should that negotiation process with pharma look like?
Cuban: So the question really is, why don’t you negotiate directly with pharma and have all their portfolio on costplusdrugs.com? And the answer is, we would love it. And even the manufacturers that we’ve talked to …. all but one, and I won’t say which, just said, yeah, we’d love it, too. But the big PBMs are saying to them, “If you work directly with them, even if it’s at a higher price, we will not give you the same placement on our formularies. And those formularies really drive sales. That’s the sales funnel for manufacturers. And so any risk of reducing their sales… they’re not going to take that path. So they’re saying to us, “No, we can’t do it now.” My response then, to take it one step further, is going to CEOs of big self-insured employers and pointing out to them just how badly their PBM contract is ripping them off. A: They need to audit their rebates that they’re getting. They probably don’t align with the contract. B: They don’t own all their data. It’s just insane that you don’t have access to randomized claims data of the members that your company pays for. So that makes it far more difficult for you to go to the manufacturers of the GLP-1 and say, we want to put together a wellness program, and we know that we have X number of people that we think based off of their existing claims would benefit from this. Will you work with us? They can’t do that.
Not only do they not get all the claims data, but by contract they’re not allowed to talk directly to the manufacturers. Maybe some of the largest of the largest can get this information and do that, but 90-plus percent that I’m aware of don’t have access to that.
Bosch: So I want to zoom out to the election a little bit now. Obviously, you’ve become something of a surrogate for Kamala Harris’s campaign. Would that be correct?
Cuban: Yeah. I mean, I’m not a paid surrogate, but, you know, I’m doing it on my own volition.
Bosch: And so what health care issues are you talking to the campaign about?
Cuban: All this. When you talk about inflation, where we are is where we are. You’re not going to get deflation because you drill, baby drill, or do anything else for that matter. But there is a need for families to reduce their out-of-pocket expenses so that they can hopefully catch up. And the reality is, real wages have grown over the last couple years, so people are a little bit ahead of inflation across the board, but there are some families who still are not. And most of those families have out-of-pocket health care expenses, both drug and traditional health care.
And so my conversations with her team are explaining how you want to work with transparent PBMs, period, end of story. You want to make that a requirement. You want all prices to be published, not just you where the government does deals, not just for 10 drugs, but for all drugs, because once you get transparency, you don’t have to negotiate as a government. The market will negotiate for you. You want to do all the things that make this market an efficient market. And transparency is at the heart of it. You know, publishing whatever data and contractual information you can is also at the heart of it. If you do those things, you will see an immediate drop in prices and costs to every household that needs to buy medications. And for all the reasons we’ve just been talking about: If there wasn’t, you know, a net effect of cost value, there’d be no reason for us to do all this.
Bosch: I do wonder a little bit about what the limits of transparency might be, you know. So you say that immediately we’ll see, in effect, everyone’s cost will go down. What does that look like for me, health care consumer?
Cuban: So if you walk into a big chain and you need generic Gleevec, you’re not gonna be charged $2,000. If you were in a state that uses a bigger PBM and they’re charging you for specialty generics, they won’t be able to hide the actual cost. They’d have to show it. And so when you have an efficient market, rather than it being unusual for somebody to know the price of a medication they paid before they need to pay it, it would be the exact opposite. And when you have that information, not everybody, but a lot of consumers get the chance to be a smart consumer. And that, in general, tends to push down the pricing itself.
The underlying reason why this works quickly is because there’s extortionate pricing that’s out there. When you know an employer pays $2,000 for Gleevec, or $8,000, maybe $2,000 net after rebate for Humira or one of the biosimilars, when they could be paying $594 — all that dissipates immediately. Just like, you know, buying a car. You know, you decide to buy a car, there’s 100 different ways to get a price before you buy it. And so it’s not going to save everybody the maximum amount every time, but it’s certainly going to go a long way towards it.
Bosch: Yeah, I mean, buying a car is a pain. I hate buying a car because I never actually know if I’m getting a decent deal or not. I do worry a little bit that health care consumers are so accustomed to paying big numbers — and so accustomed to not looking at prices — that maybe they won’t be quite as quick to adjust to this new system.
Cuban: That’s possible with anything, right? There’s times when I bought things, I’m like, oh my God, I got ripped off, and I don’t realize it. But think of the 165 million people who get their insurance through their employers. They have a very specific interest in lowering their pharmaceutical costs, and they have people who hopefully are qualified enough to take those steps. That’s where you’ll see the greatest change the most quickly.
If we go from a rebate-based system because of transparent prices to a net price-based system, then the whole game changes. The other, I think, immediate response, is deductibles go down, and potentially premiums go down as well, because the cost goes down. You don’t see the increases as quickly in Part D and other Medicare plans, Medicare Advantage, pharmaceutical plans, etc. So I think there’d be a dramatic and extreme impact immediately.
Herper: Some of the people who argue for PBMs argue that they have this advantage, that they can strike a side deal with pharma, that the consumer can’t.
Cuban: Well, no, that’s true. The problem is, they typically keep that delta. There’s no question that the biggest PBMs can negotiate the biggest and best deals. The question is, do they pass it through? And as you know, they’ve created these subsidiary companies called GPOs, where they have the GPO, who, in two out of three cases is based offshore, and that company negotiates with the manufacturer, and then the GPO, after getting a price with the manufacturer, then negotiates with the PBM but keeps part of the profits themselves, so that the GPO retains profits, and that gives the PBM the plausible deniability to employers to say, “Oh no, we pass through our entire rebate” when, in reality, they don’t. And so the complexities of the car industry….You’re probably right, bad example. If you got a better one…
Herper: I’ve been struggling to find a good one for 20 years….The Trump administration did have some interest in PBM reform. Why is Harris the horse to take if this is your issue?
Cuban: I don’t think she’s as transactional. I think she’s looking at it more from a greater good perspective. I don’t know all the ins and outs of the 2019 plan, just that they were, you know, looking to push the PBMs to be more open. But it didn’t happen. So here we are, and something definitely needs to happen. The good news is, because we do publish our price list, everybody, at least for the 2,500 [drugs] we carry and growing, everybody gets to see what the true price actually is and what our costs are for that matter. And so everybody’s in a better position to negotiate. And you know, the Harris team … recognizes the benefit of that.
Literally, back in … 2019, I went to the White House with Trump, when Trump was in office, and started to try to talk to them about this. And some of the people there were responsive and understanding of it. But he just wasn’t. It wasn’t something he wanted to talk about.
Herper: It seems like the complexity of this system drives you up the wall.
Cuban: Because everything is in arbitrage. The more complex the system, the easier it is for a company to insert themselves or extend their cost or the friction that they introduce and charge people money for it. And so it does drive me up the wall. But that’s the opportunity as well.
These big insurance companies — they’re not insurance companies anymore. And so when I go talk to companies, whether it’s for my company in doing direct contracting or whether it’s for their pharmaceutical benefit, the pharmacy benefit plan, I’m not saying do something that’s not in your best interest. I’m not saying, you know, don’t save money, spend more, or get lesser care or get lesser access to medications. I’m saying the exact opposite. I’m saying leave this big PBM and go to a pass-through PBM because it’s going to save you money, improve your wellness, give you more flexibility, help you understand your employee base and their health care needs, which in turn improve productivity and improve the culture of your organization. And they’ll do it for less money because they understand.
It’s like the days, in the tech industry, no one ever got fired for dealing with IBM. Well, that’s the same now. And the bigger question becomes, why have we got to this point? Why are these big companies doing business with these bigger PBMs that aren’t pass-through and being ripped off effectively?
And the reason is it’s not the core competency of a CEO to understand how their health care works. But what’s happening is that the numbers have gotten so big, it’s the biggest expense after payroll that now they can’t not pay attention to it, particularly now with me and my big mouth out there screaming and yelling that you’re getting ripped off, and me sitting in face-to- face meetings telling them we’re getting ripped off.
Bosch: On a scale of 1 to 10, how confident are you that we can sort of burn all this down and make it make sense as a system?
Cuban: 100%. This is literally the easiest industry to interrupt, to disintermediate that I’ve ever been involved in. I’ve never seen anything so opaque. And when, you know, the best disinfectant is sunlight and it’s easy to open up the blinds and bring in the sunlight, you know, I really think it’s 100%. There’s absolutely no doubt in my mind that we will disrupt this industry.
Bosch: And how long does that disruption take, do you think?
Cuban: Well, we’ve already had a big impact in two and a half years. And so, you know, if we just keep on going the way we’re going. I mean, I don’t want to pick a date, but again … it’s one thing to try to disrupt an industry and say, “Hey, pay a little bit more because it’s for the greater good.” That’s not what we’re asking. We’re saying, “Pay a little bit less, get better results because it’s for the greater good…” It’s not hard to sell it. We just have to get in front of people. And obviously the PBMs … they’re not sitting back saying, “Hey, Mark, take all of our business. You know, disrupt us. It’s all good. Thank you very much.” They’re fighting back in a lot of different ways. They’re telling employers not to deal with us. They’re telling manufacturers not to deal with us. They’re increasing their rebates without telling them. They are increasing their utilization management to pay for those rebates. You know, they’re not stupid. They move quickly. And so it won’t be, you know, it won’t be quick as I’d like it to be, but it definitely will happen.
Bosch: So there’s been a little bit of back and forth in the news recently about whether or not you wanted to become Health and Human Services secretary. And you said you were just trolling?
Cuban: I was just trolling, same with SEC. I was just trolling. But, you know, it’s online. You’re having fun sometimes.
Bosch: Who do you think would have more power to disrupt the system? The HHS secretary or someone on the outside like you?
Cuban: Someone on the outside. Yeah, I think there’s a lot of things the HHS could do, but it’s so bureaucratic. It’s like when you talk to people or hear people talk about we’re just going to end the Department of Education. You know, I’m a libertarian at heart. I’m also a realist. You just can’t break something down and cut it down to nothing and pretend that that’s a possibility. It’s not.
I’m all for smaller, more efficient government. But that’s one of the beauties, I think, of Kamala Harris not being a traditional Democrat. She’s really moved to the center. She’s for efficiency as well. And most importantly, she understands you can introduce, you know, new technologies, artificial intelligence, and the gains don’t necessarily mean you just have to cut everybody.
I think people have the wrong impression that the goal is to bloat because they’re Democrats. Honestly, not to get too political, but I think both parties effectively aren’t driving the bus. I think the Republican Party is driven by Donald Trump. The Democratic Party is driven by Kamala Harris. And they’re making the decisions. And in talking to her and her team, they want to do what the right thing to do is. They want more efficiency. They want more effective government. They have no problem with smaller government. They just want to make sure the results are outsized.
Bosch: Well, last question before we let you go. Do you drive your personal doctors crazy by trying to negotiate and all that sort of thing?
Cuban: No, not me personally — I got enough…I’m not an over-negotiator. I’m happy. I’m an overtipper.
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