Today’s episode is with Mark Cuban, founder of multiple businesses, owner of the Dallas Mavericks, one of the sharks on Shark Tank, and cofounder of the Mark Cuban Cost Plus Drug Company. He is joined by Vijay Pande, founding partner of a16z Bio + Health. 

Together, they talk market forces in healthcare, the importance of trust to patients, and Mark’s ideas to tackle the Gordian knot that is American healthcare.

You trust your doctor, hopefully, but after that, there is nobody in the supply chain or

care chain, that financial chain, that you trust, and nor should you.

If you were just to walk in and didn't have insurance or high deductible insurance, and you walked into 1 of the big 3 retailers, pharmacy retailers, you might pay $2, 000 a month.

Our price is, depending on strength, $14 to $61 a month.

And the crazier part is, the pharmacist who's ringing it up after having gotten the prescription, they don't know what they're going to be charging you until it appears.

There's all these things that are designed only to get revenue from the insurance companies.

Here at the A16C podcast, we have covered the American healthcare system a lot recently, and for good reason.

If you missed those episodes, we covered how FinTech in particular may be playing its role in healthcare disruption.

So go ahead and listen to those 2 episodes.

But today we have 1 very familiar founder.

You may have heard of him, Mark Cuban, who's also got his eye on the same industry through his company, Cost Plus Drugs.

This conversation covers a ton of ground, but in particular, it touches on this idea, this really important concept of inefficient markets.

And inefficient markets don't just exist in healthcare.

So I think there's a lot of learnings here for founders in other industries.

This is also a crossover episode from our sister podcast, BioEats World.

And I recently got a sneak peek into some of the guests they have coming on and there are some really big names, just like Mark Cuban.

So make sure to go subscribe to BioEats World wherever you get your podcasts.

All right, Olivia, BJ, Mark, take it away.

Hello and welcome to BioEats World, a podcast at the intersection of bio, healthcare, and tech.

Today's episode is with Mark Cuban, founder of multiple businesses, owner of the Dallas Mavericks, 1 of the sharks on Shark Tank, and co-founder of the Mark Cuban Cost Plus Drug Company.

He is joined by Vijay Pandey, founding partner of A16Z Bio and Health.

Together, they talk market forces in healthcare, the importance of trust to patients, and Mark's ideas to tackle the Gordian Knot that is American healthcare.

A lot of people would really be curious to hear about your arc as a founder and as a businessman.

And in particular, I was really struck by the fact that you started early.

And like what drove you to be thinking about business and startups and entrepreneurial behavior at such a young age?

You know, and in our household, if you wanted something, you had to earn it.

I went to 1 of my dad's poker games he had at the house with his buddies and they were drinking and yucking it up.

And I went in there asking him for a new pair of basketball shoes.

I was a basketball junkie all the way back then.

He was like, he looked at my feet, he goes, those shoes look like they work.

When you have your own job and you can afford it, you can buy your own.

And 1 of his buddies at the poker table was like, hey, I've got these boxes of garbage bags and you can go sell them throughout the neighborhood.

I did put them in my little wagon and I would literally walk around and you'd hear, hi, My name is Mark.

Who's going to say no to a 12-year-old version of this face?

I learned to sell, which was the most important feature because once you know how to sell and you're confident in talking to people and making an offer and being rejected, then it's just a question of picking up other skills.

Then from there, I sold magazines door to door.

Then I was 15, 16, and I was looking at having to pay for my own college, and so I started buying and selling stamps.

I would go to stamp shows and stamps at that time in particular and coins were the least efficient market on the planet.

And so literally I could go I did this I would I would go to 1 dealer in 1 part of the show pick I pick something up I think was for 50 cents went over and said look based off of this catalog this is this stamp which is $50 I'll sell it to you for 25 and sold it for $25.

And I just kept on ramping that up and ramping that up.

And that helped me pay for a bunch of stuff in school at Indiana.

And then when I got to Indiana, it was just every hustle all the way to earning a bar.

And I think that the underpinning of it was if you can sell, if you can recognize where there are inefficiencies, if you're curious, if you can learn, and those were kind of the hallmarks because I learned that I could know more about this little stamp market as a 16 year old than the people who were doing the selling.

There's so many inefficient markets and we'll get to it with health care that you know once you understand that the opportunities are everywhere.

But along the way too, you've also had to like build teams, right?

Whether we're talking about the Mavs or we're talking about companies along the way.

I'm curious if you have lessons for current entrepreneurs in training for sort of taking, especially a bunch of brilliant, like high performing people, but how do you get them to work together?

When you have a vision and you have a goal and you can align everybody towards that, it's really not hard to get gifted people to come along, even, you know, Maybe take less than market wages if you give them equity opportunities.

And I think that's really where I was able to really succeed with a lot of the companies I was in.

Every company I've ever started, as opposed to took over, I've given everybody equity.

My first company, Micro Solutions, we sold for $6 million.

And so there were a lot of really happy people at the time, you know, broadcast audio net turned into broadcast.com.

And when we sold it for stock to Yahoo out of 330 employees, 300 became millionaires, at least on paper at the time, we kind of told them to hedge everything and it just went on from there.

HDNet, the same thing when we sold that and so when everybody's a participant, everybody is aligned and you can get people personal goals to align with your vision as an organization, it tends to work.

Now where things get off the rails sometimes is people, you know, bring on their own agendas.

But that's 1 of the values or the benefits, I think, being in the middle of the country here in Texas.

Technology is not the industry of Dallas, Texas.

We get a lot of great smart kids from University of Texas, SMU, and other great schools.

And we get employees from TI and other great technology companies.

But they're not always looking over your shoulder to the next founder or startup that they're going to create.

And that makes it a lot easier to have a culture that's geared towards the success of your organization and everybody's participating in that upside.

Yeah, that cultural part seems like a huge deal.

How much do you feel like that comes from what you build versus geography, versus how you pick the people?

I think geography has a lot to do with it.

Just the zeitgeist, the mindset here in Dallas, is night and day different than New York, LA, San Francisco, the Bay Area.

Whereas when I go into the Bay Area and the Valley, it was always, hey, we're the smartest.

We're dealing with you, we've got an edge.

And when you're dealing with that, and I've invested in companies there, but talking to founders there, they have a completely different approach and mindset because their employees have a completely different approach and mindset.

Wherever you are, wherever you're headquartered, wherever your bases are for however many offices, geography will have an impact on your culture.

So 1 last question on sort of the founder arc, what advice would you give to your younger self?

I know there's often a silver bullet, but I'm sure you've thought about it.

But, you know, the interesting thing is there's 2 questions there.

When you're just getting started, I would tell you that curiosity, willingness and excitement to learn, ability to sell, and ability to be nice.

Those 4 elements, I think, I wish somebody would have told me to be nicer because I was always go, go, go, go, go, go, go, ready, fire, aim, let's go, let's go, faster, faster, right?

And sometimes it took my partner Todd telling me, look, you're scaring some people.

going fast with this, then they're typically going to go and you can't get mad.

I would get mad if I thought people didn't use my version of common sense.

You can't do that because people are not going to be happy with that.

And I think the other thing I would add that I think I did right.

I was always geared towards profitability, not geared towards just getting my next raise when raising money was a necessity.

It was a necessity, but I've always tried to teach entrepreneurs that raising money or borrowing money is not an accomplishment, it's an obligation.

And particularly still right now in this market.

And so gearing towards profitability, I think is a message along with being curious, learning, selling, et cetera.

Like why healthcare of all the things you could be doing?

I started about 5, 6 years ago when the Republicans took the White House, having friends that were part of that here in Dallas for better or worse, there was the desire to overturn the ACA.

You know, We started having these conversations that were just intellectual conversations.

What would we do if we were going to change all this?

And then about late 2018, I think it was, maybe early 2019, I got a cold email from a Dr.

Alex Oshmayansky, who was a radiologist by training, who was super smart, and he was starting a compounding pharmacy in Denver.

And the goal was to be able to take generic drugs that were in particular on a shortage list.

Shockingly enough, there are generics that go on shortage lists and are hard to come by and selling them at a reasonable price knowing because they're in shortage that there was demand.

And as we started going back and forth, and I'm peppering with questions, this was also right around the time the farmer bro got thrown in jail or the conversation was loud.

And I was like, look, if he can jack up the price of Daraprim by 7, 500%, that's an inefficient market.

And if he can jack it up by 7, 500, there must be an opportunity to cut it by some amount as well to be able to sell.

And then as we started digging into it more, look, the tech industry has a ton of acronyms, TCPIP, SPACs, there's every name by different language.

It is nothing compared to the pharmaceutical industry.

The pharmaceutical industry has 50 different acronyms for a price.

And so the other thing that came to the forefront very quickly was our competitive edge could be transparency.

Just showing people what we're doing would create such a differentiation and it would overcome what I think is the number 1 missing element in healthcare, which is trust.

You trust your doctor, hopefully, But after that, there is nobody in the supply chain or care chain, that financial chain that you trust and nor should you.

And so because of that, that's really was the genesis of costplusdrugs.com.

And it took it several years to get all the licenses, get all the agreements, get all the software done.

And the software is just basic stuff, right?

But it took us a while and then it took us time to get everybody to believe that we were real.

We weren't just the next company, you know, making big claims.

It's the only company I've put my name on it as Mark Cuban Cost Plus Drugs.

But once we got started, we launched on January 19th of 2022 with our website.

So if you go to costplusdrugs.com, you can look up to see if your medication is any of the 1100 plus we carry.

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Well, what do you think about the concept of market forces in health care?

It's hard to have market forces when there's no transparency and people don't even know what the price of it is.

If you think about the process of getting a prescription, the doctor says, you need this medication.

The next question isn't what is the cost, what's the best way?

Next question is, what pharmacy do you use?

And then you go to the pharmacy and you hope your health care insurance covers everything that it needs to cover.

If you're a big company, you all probably already know.

If you're a middle-sized company, you may not know.

If you're a small company or an entrepreneur or individual market enrollee, you're terrified.

You have no idea what it's going to cost.

And the crazier part is the pharmacist who's ringing it up after having gotten the prescription, They don't know what they're going to be charging you until it appears.

There's all these inconsistencies in this completely opaque industry.

When you go to costplusdrugs.com, you put in the name of the drug.

1 drug that we have a huge discount compared to everybody else is a chemotherapy drug called Imatinib.

And if you were just to walk in and didn't have insurance or high deductible insurance, and you walked into 1 of the big 3 pharmacy retailers, you might pay $2, 000 a month.

But when you go to costplusdrugs.com and you put in a MAT number or any of our medications, you see our cost.

It's probably going to go to $5 here in the summer just because our costs are escalating, pharmacy costs are escalating, and then $5 for shipping.

You know exactly what you're going to pay and why.

It's built trust because people realize we're not stealing, we're not jacking things up, Compare them to other sources, or they can compare them to what they've paid or their companies have paid.

And the other thing is it's created a benchmark.

What we didn't expect that's happening now is there's readers like Harvard went and took a bunch of our medications early on and compared them to what Medicare was paying and Realized that for just a limited number of generic medications.

We could save the taxpayers 3.6 million billion dollars a year

couple urologist at Vanderbilt did the same thing for I think 7 urology drugs and it was 1.2 billion dollars a year Our government officials at Medicare, CMS, et cetera, just really never had reference pricing that was legit that they could use.

And by providing that, again, engenders trust and opens people's eyes that we're the real deal.

MIKE GREEN Originally, it seemed like this was going to be about generics, but you recently signed a deal for 2 non-generics.

What does that look like and where do you keep on going?

MARK MOBIUS Fundamentally, there are a couple of problems that pharmaceutical manufacturers have.

And it's easier for generic manufacturers to deal with them because typically, not always, but typically for a generic medication, there's competition.

So we could go in there and even at lower volumes, at least find 1 of the competitors and have the opportunity to sell it.

So generics were the low hanging fruit for us to get started.

But they also, when you talk to generic manufacturers, they feel demonized as well.

Brand Manufacturers definitely feel demonized because when anybody talks about the price of medications in this country, oh, it's the pharmaceutical industry.

It's the manufacturers that are the bad people that are jacking up the price.

Look at insulin without realizing the retail price of a vial of insulin may have been $300 some, but the net revenue to Liliu, and it's clear in their quarterly earnings conference calls, they talk about it, was in the 20s.

Initially, by working with generic manufacturers, that proved the concept, allowed us to gain a base of customers.

Talking to the brand name manufacturers, they hate the system.

They're demise and they don't like the game of having to kiss up to the PBMs, the big 3 PBMs And the influence they have on pricing and patient satisfaction, information access, all the above.

And so we talked to Janssen, part of J&J, and we've been working on this for InvoKana and the variations of it for over a year now.

And just the contractual side of it is the difficulty.

It's not the desire by the brands to work with us.

It's just dealing with all the contracts because the big 3 PBMs don't want this to happen.

Well, in essence, we could become a PBM, but we'll work with any PBM that doesn't do rebates.

So Imsana and there's other ones that you can see on the costplusdrugs.com website that we've partnered with.

We'll work with anybody that doesn't support rebates or any kind of ancillary cost additions.

That's what creates the distortions in pricing.

And then you get a misalignment of incentives because what people don't realize, there's a lot of talk now about the bad side of PBMs, but what they're not discussing is the fact that the PBMs either own or are owned by big insurance companies.

They also own the big 3 pharmacy retailers.

When we looked into it, our basic evaluation was these PBMs have at least 200, if not 250 different subsidiaries.

What's happening now, they know because as long as they keep the pricing opaque and the supply chains opaque, that they can left pocket, right pocket all the revenue.

If regulation comes across where the PBMs can't do rebates or they have to modify their rebates or reduce their rebates, they'll get it out of a co-pay aggregator.

Or they'll charge at the retail level, and the patients will pay it there.

Or they'll come up with some other type of play that allows them to accrue more revenue.

Because the 1 thing we haven't heard, despite all this discussion of regulation and the regulations we've seen, you don't hear any of those big 3 companies talking about declining earnings or revenues.

We started our chat by talking about these arbitrage possibilities, you know, that you go businesses on and in a sense, this is kind of an arbitrage possibility that people are charging things and you can do better, but like people's lives are kind of a different thing than like buying a car or buying soap or something like that.

Because there's no alignment between patient outcomes and health care companies' profitability.

And there's a lot of discussion about accountable care organizations and value-based pricing.

And the reason why they've already failed is because the benchmarks they use to create value is relative.

It's like there's a thing called MedPAC that sets the baseline prices of Medicare.

It gets adjusted, but it's never been rethought.

When you go, you talk about market forces, this is too much information, but I decided this colonoscopy to get a CT colonoscopy, okay, instead of the rotarooter kind.

And So I went to local hospitals and looked at all the price lists, which are online.

So the biggest insurance companies for CT colonoscopy, and they show all the different deals and everything, each insurance company's got multiple deals with that same hospital, and they're all different prices, and the cash price, 25% of it.

Now, if there were market forces at play, the bigger player should have been able to get better pricing.

There shouldn't have been 5 different prices for each insurance company for the hospital and their network.

There's not an alignment with market forces or for profitability with the patient.

I'm not here to tell you I'm for single payer.

What I am here to tell you is that insurance companies, as much as they do a lot of talking about better patient outcomes, and they do some things that do help, you cannot be the driver of 30% to

of hospital and health care costs for a provider to deal with the administration and revenue collection and revenue identification and call it a market force able industry.

BRENT JOHNSON Yeah, aligning incentives of profit and patients' well-being makes a ton of sense.

A healthcare operating system that reflects the current operations of healthcare is doomed to fail because you're taking a broken model and replicating it and adding efficiencies on the margin.

I tried to get involved with the hospital here recently, and they wouldn't follow through.

All I asked for were the absolute cost and variable costs.

I don't want to know about administration, how you code.

I don't want to know about revenue enhancement cycles.

I just want to know what their nut was that they had to hit every month so that I can figure out a different way to create revenue.

I tried to pay for a study that asked CFOs of major hospitals what cost accounting they do.

Yeah, and so you're speaking to the bigger problem of misaligned incentives, Lack of transparency, but I agree with you about the the limits of single-payer But then what we have left like what's what's the way forward

if you go to the origin origins of pharmacies?

Yeah, and you know the 1950s Pharmacies bought medications they sold medications.

They gave you advice right on what not to mix and match.

The origins of hospital healthcare insurance was they went to the local communities and they went to individuals and they went to businesses and they went to unions and they said, here's the amount of revenue we need to break even and make a little bit of money.

If you all contribute that, we'll provide all the services that we're allowed to provide and maybe we'll even be a Dow to pull in some crypto term, where we'll let the community decide what services to retain and what services to add and the costs associated with it.

Now think about what happens when you do that.

You know, you guys are familiar with healthcare.

Coding isn't about better health care, even though you use it.

Medicare cost reports can be used for analysis, et cetera.

But the reality is, it's just a cost associated with generating revenue from the insurance companies.

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Curing the Trust Problem with Mark Cuban