379: How Mark Cuban plans to ‘f— up’ health care
Episode
37 min
Read time
2 min
Topics
Health & Wellness, Sales & Revenue, Science & Discovery
AI-Generated Summary
Key Takeaways
- ✓PBM Rebate Economics: Sickest employees effectively pay for employer rebates because PBMs charge full list prices during deductible phases, then share rebate savings with employers. Without drug utilization, no rebates exist, meaning patient illness directly funds employer revenue. This creates perverse incentives where companies profit from employee sickness rather than optimizing patient costs.
- ✓Brand Drug Barriers: PBMs threaten pharmaceutical manufacturers with formulary exclusion or tier downgrades if they work with Cost Plus Drugs on brand medications. Manufacturers cannot provide written evidence of these threats, making FTC enforcement difficult. This leverage controls hundreds of millions of covered lives and prevents direct-to-consumer competition despite manufacturer interest in alternative distribution channels.
- ✓Biosimilar Pricing Strategy: Cost Plus Drugs sells Hikma's Stelara biosimilar for approximately 1,280 dollars annually versus over 100,000 dollars for brand Stelara. The company updates pricing nightly through APIs, automatically lowering consumer prices as volume increases while maintaining consistent markup percentages. This transparency allows employers to use published prices as reference points when negotiating with traditional PBMs.
- ✓Direct Contracting Model: Cost Plus Wellness negotiates direct contracts with 9,000 healthcare providers, eliminating deductibles, preauthorizations, and payment delays for employees. Providers receive cash payment upfront at negotiated rates. The company publishes all contracts publicly so any employer can replicate the arrangements, creating network effects that drive prices lower as adoption increases across multiple companies.
- ✓Gene Therapy Access Model: Cuban proposes subscription-based funding for million-dollar cell and gene therapies, where families pay small annual fees per child into escrow accounts. This insurance-like model pools risk across many families who likely never need treatment, creating accessible funding for the rare cases requiring expensive therapies. He personally wrote an 1.8 million dollar check for twin infants when traditional coverage failed.
What It Covers
Mark Cuban discusses his Cost Plus Drugs company's mission to disrupt pharmaceutical pricing through transparency and direct-to-consumer sales. He explains how PBMs control drug access through formulary leverage, why brand manufacturers avoid working with him, and announces biosimilar offerings like Stelara at drastically reduced prices compared to traditional channels.
Key Questions Answered
- •PBM Rebate Economics: Sickest employees effectively pay for employer rebates because PBMs charge full list prices during deductible phases, then share rebate savings with employers. Without drug utilization, no rebates exist, meaning patient illness directly funds employer revenue. This creates perverse incentives where companies profit from employee sickness rather than optimizing patient costs.
- •Brand Drug Barriers: PBMs threaten pharmaceutical manufacturers with formulary exclusion or tier downgrades if they work with Cost Plus Drugs on brand medications. Manufacturers cannot provide written evidence of these threats, making FTC enforcement difficult. This leverage controls hundreds of millions of covered lives and prevents direct-to-consumer competition despite manufacturer interest in alternative distribution channels.
- •Biosimilar Pricing Strategy: Cost Plus Drugs sells Hikma's Stelara biosimilar for approximately 1,280 dollars annually versus over 100,000 dollars for brand Stelara. The company updates pricing nightly through APIs, automatically lowering consumer prices as volume increases while maintaining consistent markup percentages. This transparency allows employers to use published prices as reference points when negotiating with traditional PBMs.
- •Direct Contracting Model: Cost Plus Wellness negotiates direct contracts with 9,000 healthcare providers, eliminating deductibles, preauthorizations, and payment delays for employees. Providers receive cash payment upfront at negotiated rates. The company publishes all contracts publicly so any employer can replicate the arrangements, creating network effects that drive prices lower as adoption increases across multiple companies.
- •Gene Therapy Access Model: Cuban proposes subscription-based funding for million-dollar cell and gene therapies, where families pay small annual fees per child into escrow accounts. This insurance-like model pools risk across many families who likely never need treatment, creating accessible funding for the rare cases requiring expensive therapies. He personally wrote an 1.8 million dollar check for twin infants when traditional coverage failed.
Notable Moment
Cuban reveals he spends 80 percent of his time studying drug pricing mechanisms, including reading through dense MedPAC payment descriptions the day they release. He structures Cost Plus as a public benefit corporation because he has sufficient personal wealth and simply wants to disrupt healthcare economics through transparency and direct contracting models.
Episode Transcript
I got all the money I need. I wanna fuck up health care. Welcome to this week's episode of The Read Out Loud, a weekly biotech podcast from Stats. I'm Allison DeAngelis, and apologies if you're listening to this podcast in the minivan with kids in the back seat. If you don't recognize the voice, that was Mark Cuban speaking to us about health care and more specifically his efforts to, f up, meaning lower drug prices for Americans. I'm Adam Feuerstein. And, yes, we're going to have an extended conversation with Mark Cuban because, he literally did not want to stop talking to us about drug pricing. And I'm Elaine Chen. It's Thursday, November 20. Cuban, of course, is a billionaire, a serial entrepreneur, a Dallas Mavericks co owner, a Shark Tank cast member, and as you will soon hear, a man who is deeply, deeply passionate and knowledgeable about the complex world of drug pricing through his company, Cost Plus Drugs. We'll get to Mark Cuban's thoughts on the health care industry in a moment. But first, we're gonna have a word from our sponsor and a roundup of this week's biotech news. Hey, Read Out Loud listeners. Bob Herman here, STATS business of health care reporter and the writer behind the newsletter, HealthCare Inc. HealthCare Inc is a weekly newsletter devoted to unpacking the business and secret inner workings of The US health care industry. If you're someone who has ever received a medical bill or craves in-depth policy explainers or loves a playful meme now and again, I highly recommend you check this newsletter out. Learn more at the link in this episode's description. And now back to our regularly scheduled programming. Thanks. Let's start with some more deal making, albeit biotech adjacent. Abbott said Thursday that it will acquire Exact Sciences, the provider of cancer screening tests, for $21,000,000,000. Closer to our wheelhouse, J and J is buying privately held Halda Therapeutics. The price tag, $3,000,000,000. Halda is leveraging an emerging technology called protein integration to develop new treatments for cancer. In clinical trial news, Agios Pharmaceuticals reported mixed results from a late stage study in sickle cell disease. While Agios' drug improved to the hemoglobin response in patients relative to a placebo, it was unable to reduce the rate of pain crises that are associated with the inherited blood disorder. Adjo's stock price was cut in half on concerns that the study results would not be strong enough to justify a US approval. So regular listeners to this podcast know that we have discussed the pullback in The UK life sciences sector, but there is still money flowing in. Investor Medici raised €500,000,000, about $580,000,000 for a new investment fund. In addition, Paris based, Sofanova Partners, raised €650,000,000 or $750,000,000 for a new fund showing that there is life in the European start up sector. Lastly, Elaine, you wrote a story this week that looks ahead to a couple of very important readouts from …
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Products
by Hikma
“Cost Plus Drugs sells Hikma's Stelara biosimilar for approximately 1,280 dollars annually versus over 100,000 dollars for brand Stelara.”
company
- Cost Plus DrugsBy guest
“Mark Cuban discusses his Cost Plus Drugs company's mission to disrupt pharmaceutical pricing through transparency and direct-to-consumer sales.”
- Cost Plus WellnessBy guest
“Cost Plus Wellness negotiates direct contracts with 9,000 healthcare providers, eliminating deductibles, preauthorizations, and payment delays for employees.”
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