Ep 9: Reducing drug prices and fixing American politics - Mark Cuban
Legendary founder and Shark Tank investor, Mark Cuban, talks about how he's bringing drug prices down and how to fix our political system.
Arjun: While it may seem like Americans are divided on almost every issue, these days, one issue where there is broad agreement is that drug prices are way too high in America. But despite this wide agreement, drug prices have continued to rise over the last few years. And politicians in America had been unable to address the issue in a meaningful way.
Our guest today is legendary founder and Shark Tank investor, Mark Cuban, whose new company Cost Plus Drugs aims to tackle this problem with a low cost transparent pricing approach. We're going to talk to Mark today about his vision for the company and how he hopes it'll transform the overall healthcare landscape.
We'll also get into Mark's views on how our political system can be improved and perhaps even get a hint of his future political ambitions. I'm hoping anyways! Welcome to the Unbiased show Mark!
Mark: Thanks for having me on guys.
Arjun: Let's start at the very beginning. So how much higher are drug costs in the U S than other countries? And why is this the case?
Mark: Let's not look at prices and selling prices. Let's look at costs because the reality is the cost to manufacturer is the same for every drug, pretty much universally globally. And so the cost to manufacture in the United States are a little bit more like they are for manufacturing many other products, but the reality is they shouldn't be. Because when you work from cost as a foundation, our drug pricing could be as competitive as anywhere in the world.
Arjun: And so what is it that is driving drug prices up in America?
Mark: It is the most complex supply chain that you can ever possibly imagine. And when you have complexity, and it's opaque, there's opportunity to introduce new margin for new players. And that's exactly what happens.
Each step along the supply chain, depending on where you're getting your prescription from takes just a varied journey. There's not even a consistency about it. And each player tries to increase their margin and with costplusdrugs.com, we decided to remove those players and just really simplify it. And when you add transparency and simplify it, you can reduce your prices significantly.
Dan: Mark, I have a question for you. The high cost of prescription drugs is something Americans have been asking government to address for some time. Why haven't they been able to figure this out yet?
Mark: Again, I go back to what I just said. The more complex a supply chain is the easier it is to confuse the government and the harder it is for them to actually introduce a solution. It's hard enough if you're just running a lemonade stand. It's pretty simple and you can legislate all of that all day long because it's pretty obvious each step in the creating your jug of lemonade and then proportioning it and your sales price and your cost. Those are all very simple applications.
But when it comes to drugs, because, going back to when the drug is developed, going back to, when it's patented and then when it comes off patent and then how it's distributed. And we have so many stakeholders from the patient all the way through to the manufacturer, it's very difficult to simplify that. And that's by design again.
And so when you have a situation like that, it's going to be near impossible for the government to have a specific effect. And particularly when the the companies that are involved have so many different product lines or vertically integrated and horizontally integrated. So they, the government may feel like they're solving a problem on one silo in one silo and then the company or their affiliates make it up somewhere else.
And so that complexity really makes it hard to be solved with the governmental solution.
Why hasn't anyone else in the private sector jumped on this opportunity before you?
Mark: They have, but the difference is typically if you look at what happens in the pharmacy world or in most businesses for that matter Shark Tank, any type of business, people are going specifically to maximize their earnings and their profits. And if we were attempting to maximize our profits we wouldn't take the path that we're taking now.
And so competitors in a path have gone basically, you know, one path with different endings, and that path is to typically become part of that complex supply chain, because that's where the money is. And then you look to pick off your little side where you think you can have the greatest impact and the greatest return.
And either you grow that into a cash cow or you sell. I talked to somebody who built up a great pharmacy company and they sold it to the competition. And so, you know, that's just a natural outcome. And honestly, if this was 20 years ago and I didn't have the wealth that I do now, I'd probably take that path as well.
Arjun: So let's talk about where the innovation and impact of CostPlusDrugs is right now. So you're starting out with primarily generic drugs and it looks like you're not taking insurance yet. So this is for the uninsured population on generic drugs,
Mark: No. Okay. So we're selling generic drugs and the innovation is the simplicity of it. we negotiate with the manufacturer and soon we'll be manufacturing some of our own, we mark it up 15% and we show you our cost. And then there's a $3 handling fee, pharmacy fee through our partner, TruePill, and then there's shipping for $5 typically. And that's it. So the innovation is just the simplicity of it.
You can't think of five companies that you deal with personally or business wise that are that simple and that transparent. And so it may seem like, okay, why didn't somebody else do it? That really is a big change.
The second point you brought up, we don't deal with insurance companies. That's true, but our prices are so low that we're lower than co-pays for many prescriptions. And so we have people who are on Medicare. We have people who have insurance, programs that they're part of and they still purchase through CostPlusDrugs.com.
I'm sure Mark like every time you talk about cost plus drugs, everyone you speak to has some family member or someone that has a drug that's killing them. And both Dan and I have this. So it's for my dad. It's a very expensive, name brand drug called Dupixent, which is an injectable drug. And for Dan, one of his children is a type one diabetic. So Dan I'll hand it to you. Cause I know this is really close to you.
Dan: Yeah, absolutely. First off, just from the standpoint of your mission, I'm on board. I was actually scanning your website and matching it with all the prescriptions we have in my house. And I'm like, we might actually save money on this and we're insured
Mark: It's all go through that. Cause that's really the explanation. So what type of medications and where we lower than your copay?
Dan: So, that I have to ask my wife for.
Mark: I'm the same way!
Dan: Yeah, I was looking through it. I'm like, I got to talk to Sarah about this. But one of the big anxieties I have as a parent is what it's going to look like when my kids graduate out of my health insurance and the fact that there's something there that can cover them is great.
I guess the question I have, and it gets back to your business model. So you said, lots of people are going into maximize profits. Is this a mission that maybe maximizes profits as you hit a certain scale, do you feel, or is this is just a mission oriented business entirely.
Mark: Yeah, that's why we're a PBC, a public benefit corporation. We're not a traditional subchapter S or C or typical corporation at all. I got enough money, my next dollar isn't going to change my life. But this is such an open sore for the United States of America, having an impact where we can truly change the industry is an accomplishment. Let's look at what capitalism is. The definition of capitalism isn't maximizing the amount of money you can get. The definition of capitalism is being able to choose your own reward for the work you do. And if that reward happens to be something I wanted to accomplish that's the purest form of capitalism.
Alex Oshmyansky, my partner, Ryan Klein, we're we're all on the same mission just to heal that sore that is, the pharmacy industry.
Arjun: You said the supply chain is so complex and that's why we have this insane price markup. Okay. So if I'm Pfizer and I produce these amazing drugs, would I be happy to work with CostPlusDrugs? Because I'm still getting what I always get, I think, but I've just cut everyone between me and the consumer down to you. Is that how it works?
Mark: Well, Okay. So yes and no. Because if you're any brand name, drug manufacturer, the path to get through that supply chain is varied. You're not selling direct to consumers because there's all kinds of licensing and requirements and all other regulatory issues. And so you want to be recommended by physicians. That's why we see all the advertising and then you want to be included in the insurance formularies, right? The list of drugs that they'll pay for, if your doctor prescribes that medication. Right? So there are a couple of things that have to happen in order for the manufacturer of the drug to make it onto the list of approved drugs for the insurance company.
And typically there's an intermediary called a pharmacy benefit manager, a PBM. And so with the PBM started off doing is saying, look, all you different insurance companies, hospitals, self-insured companies, unions. You don't need to go out there and negotiate pricing with every drug manufacturer.
Let us do that for you. And in the early days of PBM, that was a plus, right? Cause it meant the insurance companies all got their drugs less. But as those companies, those PBMs consolidated and were bought by insurance companies merged with retail, pharmacy chains, things started getting a lot more complex and they started trying to maximize the leverage that they have.
So now they go to those manufacturers and say, Couple of things are going to happen. We're going to negotiate a great price for me, you know, I'm going to have to get you to pay a cover charge in order to make it onto the formulary in the form of a rebate. And so now they're asking the manufacturer of the drug to say, okay, you're selling it to me for a dollar, but you know, if you want to stay on this insurance company and that insurance company, you're going to have to pay me a rebate.
So now they're paying rebate that jacks up the cost. The way the government pays for things and the way certain contracts are written in private businesses It's based off the retail price. And I know you sell it to me for a dollar, but if you want to stay in that list and you want to continue to do business the way we have been, we're going to have to ask you to set your retail price a thousand dollars.
So that then I can say to the government and others. Okay. I'm giving you a 30% discount off of retail. Okay. So now we're getting paid on the backend by the insurance company and the government in some cases, seven, $700 that cost me a dollar, and I'm charging a cover charge in addition to that. And so, if you look at the the Fortune Top 50, you can see quite a few healthcare companies that are pharmacy related specifically for those reasons. And for the most popular drugs, when the pharmacy manufacturers do spend billions of dollars, whether creating, licensing and marketing, getting FDA approval, whatever it is, they're in a zero sum game.
If they're not in those big insurance company, formularies, and they can't get there because there's that gatekeeper charging the cover charge they're shit out of luck. And so when you start to see all those elements and you start to see that convoluted and complex supply chain, you start to realize that in most cases, even the drug manufacturers are not the bad people here.
It's the whole vertically integrated huge PBM slash insurance company slash provider slash payer conglomerate, that's really distorting everything and creating the problem. And so to go back to the question, you originally asked me Arjun, why would they work with me? Well, Because they don't want to be the bad guy anymore.
And if there is a company that can reach volumes and we hope and think we can knock on wood. Maybe they won't get quite the fill, if you will, and covered in all insurance companies, if there's lots of competition for the drug, but they're probably going to be more profitable. And they're probably going to have, a much better brand image by being able to sell through us.
So you take that same drug that gets listed at a thousand dollars sold, at 700, in some cases, and you sell it to us for a dollar, then let's just say a dollar 10, right? You're selling to the big guys at a dollar, $2 to us to make the math easy. We'll sell it for $2 and 30 cents. So now you're the manufacturer and you're going Cost Plus Drugs is selling my drug for $2 and 30 cents. All these other companies are selling it for this distorted price. Now, wait, there's more.
These big conglomerate pharmacy companies, and I should say healthcare companies or healthcare slash finance slash pharmacy companies, they know that they're creating a lot of issues. So they pay a ton to lobbyists, but they also start playing with, discount cards and coupons, because they want to be able to point to a drug that if you have the card and you drive 16 miles to the right, retail pharmacy chain, that you're going to get it for $19 instead of 600, knowing that 80% of their sales are going to be at 200 or more and 20% are going to be with the coupon at $19, but they get to point, if you do this this and this and this and this and this and this and this and this and this, and this, you can get your $19 card. But it's still so distorted. And that's why if you go to some companies that will do price comparison shopping for you, that there are 15 pharmacies within three miles of you and they all have different prices for the same drug, with a coupon.
Dan: One of the things I know is when you were researching cost plus drugs, you studied the healthcare supply chains and compared costs in the U S versus Canada. And do you have an opinion now on single payer health? And is that something the U.S. Should be pursuing?
Mark: No. And I'll tell you why. If you read like any of the health single-payer proposals Representative Jayapal and everything, they always start with the same, lead in paragraphs effectively saying that whoever the secretary of HHS - that's who runs the show. Well, that's a political appointment. So you can go from one administration that is pro single payer to another that's not, and all of a sudden they're diminishing what it's able to do. And so the ability for it to be politicized as the problem. I'm more in favor of a hybrid where if you're within say, you know, 200 or 300 or even percent of the federal poverty limits for income.
So let's just say you're making, for sake of example, of $60,000 or less, then it should be single payer for you. But if you're making it as much as I make, you guys shouldn't be paying for my healthcare. That's just the way I look at it. And I think when you do it that way, and it's hybrid, you bring in the best of market forces so there's competition and it's all not government dictated. The same government who can't crack this nut of complexity is going to be the same government trying to run this single payer healthcare. And that same complexity is going to be there. And the drug prices are just going to get worse, not better with single payer.
I grew up in Canada and it seemed like a very simple system. We had, OHIP at the time was Ontario health insurance program. We all had it. There was a co-pay I think I was a kid. I don't remember exactly all the details.
Mark: And particularly for drugs. Yeah. For drugs, you still have to pay a lot.
Arjun: There was still a copay. And I remember there were some issues, like you'd have to wait some times if you had like a medical procedure or a cat scan, but on the whole, the supply chain seemed a lot simpler. Right? Two things. Your political system is completely different than ours. Huge, huge, huge difference. It's becoming more contentious than it used to be. But it's still not as contentious as ours. And it's still not as, polar opposite in a lot of respects, as ours is.
you were alluding to a study that I did. I asked a very simple question. I said, a hospital in Toronto has, and I wanted to compare a hospital and healthcare in Toronto to hospitals in New York, city. Because the real estate Toronto is more expensive than in Manhattan. Nurses make a little bit more in Canada. Doctors make a little bit more in the United States, but they're comparable, but band-aids costs same. A bed cost about the same. So what are the differences that allow the province of Ontario to set a budget so that, Toronto hospital, I forget the main hospital in Toronto where I had kidney stones and went in there and got health care. What allows it to do what it does. There's very specific differences.
the province covers all malpractice insurance. And so that would be covered under single payer here too, but that's a big difference. Two, they cover all, costs. There's no bad debt in Canada for a hospital, which would happen under single payer here as well. But number three, and this is where it really starts to get very different, there, aren't the number of specialties in Canada that there are in the United States. So in essence, you have a backup system in the Northern states of the United States of America to get you get medical, travelers, you know, that go and get things done. So that acts as a stop gap, which is very important.
Mark: And probably the the biggest change and something we could do here that would change things dramatically. it's very rare to have for just a traditional patient, to, have a single bed in their room. There's always two beds or more and a hospital room in Canada. That's not the case here in the United States. Now, if all of a sudden we legislated that every hospital who got, government support in the United States had to have two beds or more, let's just say three beds. the cost of the hospital at least would drop dramatically.
The other thing is hospitals are compete at a high level in the United States. That's not so much the case in Canada. Even though you're supposed to get permissions and approvals to open up different types of hospitals in Dallas, you're going to have, multiple high-end cardiac units in hospitals at each, at different hospitals. You're not going to have as many different, competitive cardiac units across Montreal. And so the type of expectations are completely different.
Mark: Now to do single payer, you're going to have to dial back a lot of things. And I don't know that in our system that that's going to work. Which is why, I'd like to see a hybrid system so that you can, you know, have the two beds solution, malpractice covered, all this kind of stuff for hospitals that are going to deal with free care. However, you would define it using the IRS or whatever, here's my income, just like we do for Medicaid and other, programs. Then you just walk in, you get your you know, your checkups free, you get your drugs free, et cetera, et cetera.
But then you or I, or any of us who can afford it, can say, okay, I've had both my hips replaced so I'm getting my hip replaced at Carroll clinic. You know, What's the price going to be? And if I don't like it, or I don't think the doctor is good enough, I can go down the street here in Dallas. And so I think having the best of those worlds, is, you know, the type of system that I would like, because we're not going to have that fallback. What are you going to do? Go up to Canada? it's like anything else when the expectations are way up here and when politics define where those expectations are set, then it's very hard to meet those expectations when it's run by the government.
Dan: Why do you think that is? Is it who we are as Americans? We're just so.... Rabidly individualistic that our political issues just get more contentious. Is it systemic? Like why are we so polarized?
Mark: Because that's the way our voting system works. we reward polarization. You have to get it through a primary. And the people who vote in primaries and donate money to candidates in primaries typically take them. I don't want to generalize too much, but I think there's enough written out there that says, they're the ones that are the most extreme.
If I'm a single issue voter and that's very important to me and I have the resources, I can have a lot of impact in a primary by donating money and donating my time however loud I can get to get people to support my position. You know, you got to make those voters happy, those primary voters and contributors happy. And that creates a lot of extremism in my opinion.
Arjun: So I think Alaska is famously going to test primaries out this theory. Right. They're going to have open primaries.
Mark: Well, they are ranked choice voting.
And New York mayor was ranked choice voting and, Maine, I think is ranked choice voting. And, you know, I tweeted this, I don't think it was an accident that the Senator from Maine and the Senator from Alaska were the ones who voted to approve our latest Supreme court nominee.
Arjun: Right. Because they're not worried about the backlash.
Dan: So I do some work for an organization called Rank The Vote that actually promotes rank choice voting nationwide. Your tweet was actually shared around Rank The Vote when that came out. Yeah. You made quite a buzz. I don't know if your ears were burning Mark.
Mark: And I've been a fan of rank choice for a long time, or I should say it for a few years now. They all want me, you know, give a lot of money to get actively involved and it's just not where my focus is now, but I am a believer in it for sure.
Dan: Yeah. So do you think getting back to something I asked earlier on, which is why hasn't the government figured this out? Do you think that might have something to do with it? Do you think that our government might have an easier time figuring these problems out if they had a more sensible electoral system?
Mark: Yeah. just ask yourself a simple rhetorical question. Do we get the best candidates for office?
Arjun: Case closed.
Dan: Yeah. There we go.
Mark: You know, And then the next question is why.
Mark: And when you have a contentious system, the more difficult it is for somebody to run that just not economically, just the abuse you have to take. You have to typically be a Stepford candidate and in order to be able to go through it, or you have to have no shame whatsoever, you know, for yourself or your family. Everybody's got a history and you've got to be willing for it to be dragged through the mud.
Canada has a lot more of that now. And it's raising its head more. But, I think when you have a multi choice voting environment, I think a lot of that is diminished because it's not a, it's not a binary decision and you can bring in more candidates with more varied backgrounds. Voters can be more accommodating because, it's like sending, a parent to the store for ice cream and asking the kids what kind of ice cream? Well, If they have an vanilla, I'll take vanilla. If they don't have vanilla, I'll take chocolate. And I think that just changes the tenor of a lot of our system. And really an underneath that, the next question becomes, why do we need parties at all anymore?
Arjun: So I was reading, a book called Why We're Polarized by Ezra Klein. And, it's fascinating. I know the founding fathers were worried that parties could actually be a really bad thing.
Mark: George Washington and his farewell address. That's all he talked about.
Arjun: But then parties formed, at least as Ezra outlined in his book, because otherwise it's hard for voters when they go to the polls to actually get movement on any issue, everyone's fighting something or the other. It's sort of all over the map. And at the end, you end up with no movement.
Mark: See, I would disagree with that vehemently because all you have to do is look at the counter that all their conspiracy theories.
QAnon had a movement without a party. And you can name a dozen different conspiracy theories that are started organically and virally, and they come together without formal organizations. You can see the extremist, the proud boys is an example, or, any of the others on the left, right? They don't need parties. They they come together because we're all part of an unwired network. You can have independent radio stations and when they all work together, that's called an unwired network. They're not owned under one company. And that's what happens. We're all part of, of a group somewhere, whether it's on Twitter or Instagram, or we follow the same people on TikTok or whatever, it may be on Facebook. And so there's ways for people to connect and gain momentum and some, source of power, if you will, without having a party. And so I would disagree with Ezra that that's no longer a necessity.
Dan: I've developed a theory now that all politics is media. And the parties really just a vehicle. Cause if you look, with the exception of Biden, our last two presidents were celebrity presidents. Obama was more
Mark: Well, Obama wasn't, But he was certainly a media figure before he was a candidate in a way,
Dan: you know?
Mark: I would tell you that charisma plays, right. And that we we've come to an era where the platforms are there and it's just a question of charisma. We've all become performers. Social media is performance art. Period, end of story.
You know, we've all written those posts and we thought to ourselves, okay, how's this going to play? Then you write it up and you start to edit it before you hit post. And the whole time you're thinking, okay, what's the good side of this. What's the bad side. What could go, right? What could go wrong? Who's going to like it. Who's going to hate it. How's this going to impact any number of different variables?
It's a performance. It's like the table read. You're having your own little table read for a Seinfeld episode in your own mind. Everything that we do now, because it's so driven by social media, I mean, reporters, it's not about what gets into the New York Times first versus who tweets what first. It's even worse in sports, you know, where the reporters just troll you continuously privately saying, give it to me first, give it to me first, give it to me first, and that is their performance art, on social media. And so we've all become social media performers. performers.
I don't know how old your kids are. Mine are 12, 15 and 18. They're social media performers. Everything that they post, how are their friends going to look at it? How many likes are they going to get? What are they wearing? What are they saying? who are their friends? You know, Who's going to like it.
We're all performers now with social media and the parties to a certain extent give us that platform. The young candidates now, are this extremist more than anything, when you think about. And the old candidates are the worst performers, but they're using the party economics and the party platform to retain power as much as they possibly can, even if it's the most ridiculous shit that they're saying ever. The first step to me is you get rid of parties, but I know that's pie in the sky.
Arjun: So you famously tweeted at a Democrat representative, Alexandria Ocasio Cortez. You said, Hey, you're coming in, tone down the partisan language a little bit, because quote we're all in this together.
What was her reaction, if any, and what have you seen when you said this?
Mark: Yeah. None. I mean, I don't expect it. You know, lots of people check marked or not, tweet to me, and I'm not going to respond to all of them. I didn't expect anything, but you never know. Like I said, it's performance and you don't know how people in the audience are going to respond or, whether or not they're looking down at their phone.
And so you throw it out there, you know, you make your performance and you see what happens.
Arjun: This is fascinating because you're trying to disrupt the way we get drugs and make it easier and really fix this problem that's big. And then I was thinking, I wonder what else Mark can do. And I was going to talk about maybe hospitals and and maybe health insurance,
Mark: We can talk about those all day long.
Arjun: You also went straight to let's just eliminate parties. I was like, okay, that's disruption at a whole other level but...
Mark: yeah, but that not going to happen. Because the entrenched, money and power, it's just not going to happen, in the next 30 years. I mean, I wish. Shit I grew up, in that, you know, sex, drugs and rock and roll and question authority, generation. And we turned into Republicans that watch Fox news.
It's just so disappointing, you know? And, and so it's just ridiculous. I had such high hopes for the hippies and the hippies fucked up everything.
Arjun: yeah, that's the quote of the show right there.
I'm curious Mark, so there's cost plus drugs, a good start and you'd mentioned in another interview you're going to, apply to, or rather negotiate with manufacturers, start getting name, brand drugs, and.
Mark: Yeah. We will do brand names. You're fixing that side and in time, I'm hopeful, at least by time Dan's kids and my kids are older this could be like the way we go. What about the rest of The supply chain? Anything, any thoughts on your own insurance company or your own hospital company? Effectively? A Kaiser like system
Not insurance companies, because that's kind of a reflection of the, problems of how we finance. But for healthcare yeah. For providers, hospitals, and the like, it's something that I've obviously given thought for as we discussed a little earlier. And I think if we're able to do this, maybe that's next.
But that's less obvious, because a fixed cost per se of a heart transplant because there's so many other factors that go into having a good outcome. With drugs, you have to go through all the FDA thing. Well, with a procedure in a hospital, we can deal with price and costs, but trying to get the right outcomes are real time and more complex.
But I think there's a place for transparency in hospitals and it doesn't exist. I tried to do another study where, we were going to the CFOs of hospitals. So I, I talked to this company, I'm like, okay, can we interview CFOs of hospitals to find out what type of cost accounting that they all do? None would participate.
I went to an event, pre pandemic at the university of Pennsylvania for, healthcare conference. One of the great lies of hospitals is they say that their costs are eight to 9% above, what they get paid at Medicare rates. Total bull. You're not even willing to talk about your costs. You certainly can't tell us whether you're making or losing money.
So I asked somebody who ran a hospital. Do they make money at Medicare rates when a kid comes in with a broken arm? He said, yes. And I'm sure, part of that Toronto versus New York, if you look at the top 35, I think procedures that are performed in the hospitals in Toronto hospitals or Ontario hospitals, maybe that's what it was. They charge less than Medicare. So how is it that they're able to charge so much less for Medicare and break even. So even if we backed in the cost of malpractice insurance, backed in some of the costs of real estate, backed in making sure all the bills are paid, all these different things that like that we talked earlier about that distinguished Canada from the U S the price variance shouldn't be that great.
And then to make it even worse, CMS passed a law that took effect January 1st of this year, last year, I forget that said you had to post your pricing for you know, your procedures. And so I went to get a CT, colonoscopy, and I wanted to price shop first. And so I went to a couple of hospitals, ended up the amazing thing is first it's a convoluted spreadsheet, right? They don't want to make it easy for you to at least about half of them don't want to. But then when you start looking at it, they list them by different insurance program or different insurance contract they have with insurers.
And so from one insurer to another, that CT colonoscopy could have been 2,500 to 3000. And within the same insurance company contract, there could be different prices and my cash price, was like $600! A third or of what, the insurance companies were, were paying. And you would think the insurance companies with all this negotiating leverage would be able to get a better price, but you would be wrong. The only interest that out of payers, which are the insurance companies more often than not providers, which are the healthcare hospitals, or patients, the three Ps, the only aligned interests are the payers and the providers, because the higher, the top line price is the more money they both make! And they still have, well, we're trying to give the best care for our patient. Okay. That's fair enough. And you know, when you're that patient and you were in a car wreck or whatever, you know, you're sick, whatever, something bad happens, you're not price shopping. You just want to get healthy.
So the payers and the providers have got the leverage, and the way things are structured again, economically, you know, look at, the ACA and the ACA there's this thing called a medical loss ratio that says, of the insurance premiums that are paid to the insurance companies, you have to spend at least 85% of those on care.
And they jerry-rig a lot of the numbers. Or I said, allegedly, Jerry rig a lot of the numbers. But still your net is 15%. That's not your profit, but that's what you're allowed to have leftover before expenses. Well Guess what? 15% of a bigger number is better.
And so what is the incentive to lower price of 15% of a lower number?
Hell no! Is 15% of a bigger number is bigger number at the bottom line. the incentives for the ACA were not aligned. And that goes to the heart of single payer as well. I get what they were doing because you know, insurance inflation and healthcare inflation was astronomical.
And the ACA saved hundreds of billions of dollars, if not more. So in many respects it was a win, but from a strategic perspective or a macro perspective, the interest of the payers and providers aren't economically are not aligned with those of the patient. And that's creating a lot of the inflation we're seeing.
Dan: I want to get back to something you said at the beginning of the episode, which is you talked about capitalism being a system where you could choose your own reward. And one of the interesting things, and I tend to be a fan of letting markets figure things out, but. I definitely think the healthcare market is one of the greatest failures of the free market system out there.
And so I guess my question to you is we have a problem that maybe the government can't solve. We have a problem in the private sector already hasn't been able to solve, and you're looking to solve it by taking a reduction in profits. How do we get more people to make that choice? How do we get more people to make the choice, to do a business for the benefit for the reward of benefiting society, as opposed to just maximizing profits?
Mark: So government can have a role. It's just got to choose where and how and what. There should be an America, Inc. There should be somebody representing the interests of each and every one of us from the just born child to, the right a hundred and three-year-old, whatever it may be, regardless of their economic circumstances. The problem is in our system, the rewards are about power as opposed to results. it's all goes back to, if you look at our candidates that we're asking to at least have a foundation or an approach to solving these problems, we 'aint drafting candidates to that that are capable of doing that. We're drafting candidates who are able to get a power base that gets them elected or that the power base chose as the candidate. I mean, I don't want to get into partisan politics than describing candidates. But just look.
So if I was coming in and saying, okay, Mark, what do you do right? Where do you do this? Well, I can go to a hospital that's not doing well. And I'm going to say, we're going to beat you. You want the money from, if I'm representing however many dollars come from this state city county, whatever it may be, here's the things.
But I'm bringing in somebody who is not a politician. I'm bringing in somebody who is a business person who knows this, who is their job, is based off of doing A, B and C. Now that's easy for the say it's near impossible to do at scale and, across this country.
And so you've got to, be good at picking your battles if you will. But there are ways to get there. We just have to be able to pick better candidates that are more literate in solving the problems that we have as opposed to just gaining power. And we also have to stop having political appointees that are based on two parties. we're arguing about the Supreme court and it's, it's, you know, liberal versus conservative. Well, Those two factions together don't make up 50% of the population.
Arjun: I find this really interesting mark that, you know, this idea of, well, actually, there's, there's so many different ways we can go about this. One is you're a billionaire who is doing something good for society and saying, profits are just not that interesting to me at this point. There is this backlash, I would say, maybe a undercurrent and there's this book by this guy named Anand Ghiridharas
Mark: Yeah. I've talked to Anand before.
And so, you know, there's a bunch of people that say, billionaires are are doing too much already. Like we shouldn't have to rely on them. The fact that we got to a society where we need people like Mark to come in and solve problems is itself a bad sign. What do you think about that?
Mark: Look, to be a billionaire, you have to get lucky. scale does not come from just hard work, otherwise we'd all be billionaires. But I think I'm going to get this wrong, but in Anand's book, He he talked about, going face to face with the problems I'm paraphrasing and being present to get things done.
And that's the thing. You need people who are going to be present. And it's hard for everybody when they're just trying to get through the day. When I was broke and sleeping on the floor. I wasn't thinking about any of this shit. I'm thinking about, how am I gonna be able to get my own apartment? How am I going to be able to pay for a car and how am I going to not have bill collectors calling me every day? And so, the benefits of wealth are time. You're always going to have the wealthy have an advantage because they can apply their time to things that are important to you.
And it won't matter if it's a billionaire or a hundred million dollars. And then the question becomes what's the threshold, you know? But I think the bigger point and John Legend likes to make this, or did like to make this point as well, is that charitable giving is a curse, not a blessing. It's like a drug, It just makes people dependent on it. It creates an addiction for those doctors. So whatever cause somebody who's wealthy decides to give to, put their name you know, you know, does this or that, you haven't solved the problem. You've just created an addiction to the need for more money.
And, the the bigger issue becomes, how do you solve those problems now? Again, if we're just having random discussions, if it were up to me, there's too many charities, but not enough charitable activity. Whether this is government driven or some other mechanism, typically when I get a ton of request obviously to give money to charities. And very often it's because somebody suffered a tragedy and they want to do something in the name of the person who suffered, died or whatever it may be, or to support somebody. And they create a charity to do this when there's already 15 charities or 20 or 50 or a hundred charities doing the exact same thing.
And all that overhead. It's like a patent. You have to look for previous art. You should have to look for existing operating charities to see what they're doing to make a case before you get that 5 0 1 C3. Because if the goal of charity is to have an impact and, improve things, you're not going to do it, you going back to the free market, right?
If you have 100 charities doing the exact same thing in the same community, they all can't be effective. They're competing for money. They're competing for resources. They're competing to find that cure or whatever it is. And maybe they work together. More often than not in my experience is they don't. And so they're not going to be as effective.
And so that addiction to money that Anand was talking about it he's right. which is, you know, if you look at what we're doing with Cost Plus I didn't make this a charity. we didn't want to go out and get donations. we wanted to be solving a problem.
Self-sustaining rather than, we're getting bigger. And if we want to serve another million people, we have to raise another $6 million. That's the last thing I wanted. And because again, he was right that just charitable giving by rich people and choosing what they'll give to is an addiction of charities that doesn't solve the problem.
It just makes it, you know, an ongoing, self-serving cycle.
Dan: Yep. And I think what most people want to is I think most people don't necessarily want charity. They just want to not get screwed.
Mark: yeah, but, but the solve that not get screwed problem. How do you do that? Just the whole idea that, Hey, we're rich, we're giving money. Again, part of his bad thing, of billionaires, get lots of money and they have lots of money and they make themselves feel better and they make everybody else feel better about them because they're donating all this money.
But you look at, what, Bill Gates has done a lot of respects. He's going out and inventing solutions. You know, It might be toilets in the underserved world because that's what they need, but that's different than I think the problem that he was defining and, you know, but to a certain extent he was right this.
I wanted this to be a business that doesn't require donations that solves the same problem. And there's a hundred other issues that can be solved.
Arjun: Well, I know we're coming up on time, Mark. Maybe one last question from me and Dan, I don't know if you have
Mark: Sure. Now this is fun.
Arjun: I don't know if this is asking too much, but you've got kids and you see them growing up in this country and you clearly want to build a better nation. I mean, You wouldn't do cost plus drugs if you didn't have that desire. What are other things that you want to say, man, before Mark Cuban 's professional work has done, these are problems I want to fix. What else is close to your heart?
Mark: Yeah, I'm trying to avoid politics, but this whole conversation on voting... you know, so healthcare and voting are the two things that I think are the underpinning of huge problems in this country. If you can't be healthy, there's not a whole lot that you can do, and if the politics aren't fixed, not that you can ever fix politics. Because any search for power is going to have, a lot of problems associated with it, but if we can make it more open, like Dan, you know, the programs you're working with so that we can attract better candidates. when I was a kid growing up, being a politician was an envious position, it was like, oh wow, that's somebody trying to help the country or help the community.
That's not the case anymore. We kind of looked down on politicians, why is this person even doing this? And so I think trying to change that, and part and parcel of that is I think there's a better, different role for government.
I think we've got to get out of the mindset that government is bad because we have the image of the paper pusher, politician, or bureaucrat that just, write something, a piece of paper puts it in the filing cabinet, pulls it out of the filing cabinet, erases it writes down the same thing on the piece of paper.
And it's just by definition, inefficient. I think that's changeable because of technology in a lot of respects. The impact that AI is going to have and, an underpinning of all this is, and better government is if we don't win AI, we're not going to be the dominant superpower in the world any longer.
And that applies to medicine that applies to military that applies to, government as a service that applies to, reducing bureaucracy. And so all these things of just trying to approach problems by finding better people, to solve the problems through politics and recognizing that if we have better people and we're more technologically literate, we're able to find better solutions.
Okay. or better people that enable the technology or vice versa. I think those are things that are, lofty but worthy, efforts.
Arjun: Nice. This is a minor anecdote, but I've always thought it was interesting that in, a little bit in Canada, but in a lot of other countries I've been in, politicians often take public transit. It's a really minor observation, but what always meant to me was that you're just one of us. You're not higher.
You're just one of us. You have a limited time in office to do your time, and then you're gone. And the next person, and we're all just part of the same community. It doesn't feel like that as much in the United States, at least at the federal level. I understand, of course, a massive, the most powerful country in the world at the state level.
It's okay. I do see my state politicians actually here in San Mateo, but, Yeah. I don't know if there's something where it could just be like, Hey, remember, you're one of us. You serve us. We're part of the same community.
Mark: Yeah, but you're not one of us because you have to go through that whole political power structure of the party. You know, I, I support, an organization called the center for competitive democracy.org. And all they do is sue states and municipalities and whoever to allow independent and third-party candidates to get on the ballot.
And it's just ridiculous that, an independent or a small candidate, a small party candidate has got to go through. I mean, just trying to run for governor, just trying to collect signatures. Just trying to get on a ballot and the efforts, the worst part is it's not even so much all that.
It's the efforts that the incumbent parties make just to retain their power. I'll put this out there for an open call. So one of the ways to impact the parties is through an antitrust lawsuit. But it's already been established that it can't be over something political.
In other words, if the Republicans come in and force, me as an independent candidate off the ballot, that's not antitrust. But if you start a business and you want to buy the Republican or Democratic mailing list and they'll sell it to somebody who's a Republican and Democrats, the Democrats, but they won't sell it to you because you're an independent, if anybody knows any examples of.
Get in touch with me because that's truly antitrust. It'd be the equivalent of one of these big PBM stepping in and saying to a brand name, drug manufacturer, don't sell to them, because we have the market power and we're not going to let you do that. And so by definition, these, the two incoming parties are antitrust candidates, there shouldn't be this duopoly the way there is because they have too much market power, but the question becomes what, what type of lawsuit can you file and how do you make it happen?
And it, it has to be business related since antitrust is a business statute. It can't be politics related. So if anybody's got any ideas or not ideas, experiences where a party wouldn't sell them something, because they weren't a member of that party, let me know.
Arjun: Good to know.
Dan: you've got me thinking
Mark: Yeah, it's crazy. Isn't it? Yeah. It's
Arjun: By the way, we'll do a shout out. One of our previous guests was Lee Drutman, he's a political scientist at New America and he has this book called Breaking the Two Party Doom Loop. So I don't know, Mark, if you might find that interesting, but this was his whole thesis. Like we've got to break this two party system and he spent a ton of time researching it so he will know a thousand times more than I would be able to speak to it .
Dan: Yeah, there's actually there's a bill on the floor of the house. I'll do two plugs here. There's a bill on the floor of the house. The fair rep act. It's HR three H 3, 8 63, and effectively builds the electoral model that Drutman talks about. So basically makes multi-member congressional districts, opens the door for third parties to come in and gain political traction.
Mark: Yeah. I don't know if I like third parties. I like no parties because cause third parties come in thinking that they're not going to be the play that the incumbent parties are, but the incumbent parties used to be third parties.
Arjun: Yeah, it actually, if you look at Israel, Israel is sort of the extreme example. it's like, there's so many parties. Everyone would like its own chunk of seats and then just a bad coalition system that can't seem to get anywhere. So I think that's what you're saying. It's not more parties
Mark: And that's not a bad
Arjun: Well, I mean, They have an election every six months, so I think that's probably
Mark: not a good thing.
Yeah. Yeah. Well, That's different. Yeah.
Arjun: But I think I get what you're saying now. I never thought about no parties at all, But that's fascinating. And I do need to spend more time reading on it.
Mark: Yeah, because in a digital world, you don't need that party service connective fiber across disparate, locations and people that otherwise would have a difficult time connecting. They have conventions, they bring people in and that's how you meet everybody and talk to everybody.
They have fundraising efforts and they have an infrastructure that has people dedicated to the various functions that you otherwise would not have access. You can create your own act, independent blue, and you know, whatever the Republican version is, what else do they do?
The conventions have become, just shows and relatively meaningless. Local young Republicans, young Democrats, whatever it may be young, progressive organizations, those are social venues, more than anything else. And at the end of the day, it's whoever has the most power and can put together the best coalition to pick the candidate that they
Dan: Even you look at, Bernie Sanders and Donald Trump. Bernie Sanders wasn't even a Democrat. Donald Trump was like a former, a Democratic donor. Both of them became the most powerful people in their parties at one point in time, entirely due to the amount of eyeballs that could attract.
Mark: Well, the eyeballs and the fact that the infrastructure was all set. There was a way of doing things within the party and they kind of turned it a little bit upside down and were able to attract attention like you were just saying Dan. And no one else was able to attract the attention so they were able to just run right to the top. But if that infrastructure wasn't there and they had to work to acquire what rank choice let's say. And, the coalitions would be completely different. The coalitions would be, between two or three different candidates saying, okay, pick one of the three of us as opposed to just one. And let's see where it takes us.
Arjun: Incidentally, there's a independent candidate for governor of California. His name is michael Shellenberger. It's interesting in light of your comments, Mark, I'm realizing now why he's a plausible candidate. He's built a massive following on social and he's written a ton of articles about what's wrong with California and I'm neither for or against him.
I'm just pointing out how he's built his base. And his whole thing was how, mental health treatment and drug addiction is a huge problem here and homelessness and why they're interrelated and California's policies are not very effective at solving it. So he's done a lot of research. He feels he has a solution to this and energy, and he's a pro-nuclear guy, blah, blah, blah.
Just thinking about it. Why did this guy, why is he even on the slate? Why is he even a plausible candidate? And it occurs to me that you're right. It's because he's managed to pull together all these people, which 20 years ago, he wouldn't have been able to do. And now we're all talking about him here on this podcast.
He's just, he's a former environmental activist turned journalist guy. And he's not a Democrat or a Republican.
Mark: Remember if you go back far enough in history and I guess not even that far, there were king makers, right? There were gatekeepers, who did the newspaper endorse? What were the articles written in the newspaper? Now they have a little bit of impact only because, baby boomers and older, read the newspaper still and are more likely to vote.
So they still have some influence, but that's waning. And underneath that social media are the platforms that, convey connection. We're going to have that first TikTok, successful candidate, just kinda like Clinton. And then Obama went on MTV. Clinton went on, they're playing the sax and Obama went on there and did a spiel on late night TV. John F. Kennedy, the first debate taking advantage of the mediums, the mediums are changing. They, king makers are changing. The gatekeepers are changing. And so it's going to happen. It's just a question of who's that breakthrough candidate.
Dan: James Madison is rolling over in his grave right now hearing.
Arjun: Well, Thank you. so much, Mark. This was such a delightful conversation, so inspiring. Man! lots of stuff that I'm thinking about, both Dan and I are parents. So we always think about what the future is going to look like. That's pretty cool some of the things you're doing and best wishes on cost plus drugs. I'm, I'm really hopeful it takes off. We're certainly gonna look at it as well for
Mark: Well, it's already taken off. Yeah, I'm telling you, it is just stunning. we're already past our two year projections and we're three months in. So yeah, it's just blowing up. We're past 500 drugs now we'll have hopefully, approaching 2000 by year. We'll have some brand name drugs, we're hopeful. I don't want to jinx us and name any, but they're ones that, people use a lot And so please go to cost plus drugs.com, check to see if your medications are there. And even if they're not, you can tell us what you take, sign up and then we'll send you alerts on when we carry that drug. So even if you're on insulin, like your son's on or daughter's on insulin, sign up, put insulin down, whether you're slow or fast, whatever brand you take. And if, and when, if we're able to, it might be a year, it might be two years who knows, but, I think there's a good chance we're going to get through everything.
Arjun: Fabulous. Well, Thank you very much Mark. Thanks so much for taking the time. This was great.
Mark: Yeah, it was a lot of fun. Thank you. Yeah. Appreciate it.