Mar 5, 2024, 8:01 AM ETFireside Chat, Interview, Keynote

Sharks Never Stop Swimming: A Conversation with Mark Cuban

Cost Plus Drugs was founded after Mark Cuban received a cold email from radiologist Dr. Alex Oshmayansky regarding a compounding pharmacy in Denver; Cuban expanded the concept to a national scale.
The company publishes its exact costs, a fixed 15% markup, and a public price list for approximately 2,450 medications, with the inventory count increasing daily.
Retail pricing includes a flat $10 shipping fee for mail-order prescriptions and a $9 pharmacy fee fee for retail network purchases.
The model aims to expose systemic opacity where patients and providers typically lack pricing transparency before prescription fulfillment.
Harvard and Vanderbilt researchers have utilized Cost Plus Drugs' price list to calculate potential government savings, estimating $3.6 billion in savings for CMS if purchasing urology drugs through this model rather than current sources.

The company launched "Cost Plus Wholesale" to sell to hospitals and government entities, which previously could not access the company's retail pricing structures.
Cuban argues that self-insured employers often unknowingly pay $30/month per employee to benefits managers who provide negligible administrative value compared to the savings from elimination.
Direct-to-consumer testing revealed massive price disparities: a medication costing $10,000 every three months with insurance was available for $50/month via cash payment.
Cuban advocates for the creation of a dedicated "Healthcare CFO" role for companies with over 100 employees, estimating this $200,000–$300,000 salary will yield massive returns through cost negotiation.
Direct contracting with providers allows for rates of 80–100% of Medicare prices, a significant reduction from the typical 250–275% of Medicare negotiated by major insurance networks.

Three major PBMs dominate 80–90% of the market share, utilizing "scale capture" and "regulatory capture" to maintain opacity.
PBMs often exclude lower-cost biosimilars (e.g., refusing to carry $700/month alternatives to $8,000/month drugs like Humira) to preserve rebates and margins.
Revenues from rebates paid by drug manufacturers are largely retained by PBMs rather than passed to employers, with the cost effectively passed to older and sicker employees through higher co-pays.
Independent pharmacies face existential threats from large PBMs, receiving only $0.50 to fill scripts that cost ~$12 to dispense, and being hit with "direct DIR fees" that result in losses of $10–$30 per Medicare fill.
Cuban supports legislation to mandate a minimum payment of $12 per script for independent pharmacies to prevent their closure by big three PBMs.

The company achieved 17% of the cash mail-order market with zero marketing spend, attributing growth entirely to published transparency.
Cuban notes that contracts between employers and providers often contain NDAs prohibiting the sharing of pricing details; removing these clauses would allow rapid industry-wide adoption of lower rates.
The model is replicable for other businesses, with potential third-party administrators charging transparent, per-transaction fees for network administration.
Cuban suggests that if just five Fortune 500 companies left the major PBMs and insurance carriers, the industry's business models would be forced to change immediately.
The strategy involves paying cash upfront to hospitals and networks, eliminating administrative overhead and AR risks associated with co-pays.

Cuban identifies higher education accreditation and the proliferation of non-essential campus infrastructure (e.g., specific departmental buildings) as key drivers of rising tuition costs.
He critiques the inflation of average GPAs at top institutions, noting grade inflation over the last 15 years without a corresponding increase in student capability.
Regarding Shark Tank, Cuban identifies his favorite moments as investing in entrepreneurs from "the middle of nowhere" whose ideas change lives.
Cuban proposes changing show rules to discourage or limit participation from Harvard, MIT, or Stanford students who use the platform primarily for commercial validation rather than genuine negotiation.
He emphasizes that the show's success is unique to the American culture of celebrating the "American Dream" and the willingness to take risks ("sweat equity") rather than relying solely on capital.
The discussion highlights a lack of government celebration for entrepreneurship, with a call to better recognize and support small-scale innovators in middle America.