At the Fortune Brainstorm Tech Dinner in Las Vegas, Fortune's Andrew Nusca interviews Mark Cuban about his work with Cost Plus Drugs. Cuban discusses disrupting the pharmaceutical industry, tackling healthcare inefficiencies, and the role of AI in business innovation, while also sharing insights on NBA viewership trends.
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00:00You know, we're a family program, so I'm going to use a few words in this introduction
00:04that I'm stealing from The Good Place, the television show. Yes.
00:09You said earlier this year in a different interview that you like to fork shirt up.
00:17No, I fuck shirt up.
00:18Oh, see, I was trying. Sorry, Mom.
00:22You know what, if you have a drink, because he said everybody here is going to be really
00:24intelligent. If you have a drink, chug it, so I sound really intelligent.
00:28There you go. Perfect. Anyway, you said that in an interview. Initially,
00:31you were talking about when you purchased the Mavericks, the Dallas Mavericks NBA
00:35professional basketball team quite quite a while ago now.
00:40But you also were applying it to this cost plus drugs thing.
00:44Most people who want to fork shirt up throw an ax in Brooklyn somewhere.
00:49You know, why did you decide to take on pharmaceuticals?
00:53Because everybody thinks it's fucked up.
00:55You know, and they're right.
00:57There's nobody who looks at the health care system or the pharmaceutical
01:02industry and says, wow, that's well run. That's just the way we want it. It's great for us.
01:06We love participating in it. And so it originated because I got a cold email from a doctor,
01:13Alex Oshmayansky. He wanted to create a pharmacy in Denver that manufactured
01:20generic drugs that were on shortage.
01:21That's not usually the kind of pharmacy I hear about in Denver.
01:24Sure. But so I was like, we started talking. I think I said, that's interesting.
01:30I didn't know generic drugs went on shortage. Didn't seem to make sense.
01:34But it was right around the time that the pharma bro was going to jail.
01:37And I started digging in and looking at what he had done.
01:41And this guy just basically bought a whole year's worth of manufacturing for a drug
01:47called Daraprim, a generic drug, and then just jacked up the price.
01:51And then as I started digging up, digging in more, it was obvious
01:54this was not an efficient market. It was very inefficient. It was very opaque.
01:59You know, if you think about what happens when you get a prescription from your doctor,
02:02they say, hey, you need this medication.
02:04And the next thing that comes out of the mouth is what pharmacy do you use?
02:08There's absolutely no understanding or no interest in whether or not you can afford it,
02:12whether, you know, whether your insurance, how it would impact your insurance,
02:15your deductible, your coinsurance, whatever.
02:17And so the more I dug in, I was like, okay, nobody knows what the price of anything is.
02:23If we create a company and we, A, limited our margins and B,
02:29published all of our pricing in our price list, then maybe we can have an impact.
02:34And we started in January, on January 22nd of 2022 with 111 drugs and, you know, just a website.
02:42And I did a couple of interviews and the next thing you know, it just blew up.
02:46And here we are just about three years later.
02:48I don't know how many millions of people we've helped.
02:50I don't know how many hundreds of millions of billions of dollars we've saved,
02:54but we're up to 2,500 medications.
02:56And, you know, the industry now, the big CVS, you know,
03:00Optum, all the big guys are having to copy what we're doing.
03:04And so it's been a great ride so far.
03:06Can you briefly explain to those of us who have no idea how any of this works,
03:10which of course is the premise, exactly what it is that you do?
03:14You take these generics.
03:16It's very simple.
03:16If you go to costplusdrugs.com, and I see a bunch of guys here and their wives probably.
03:21So let's just use a sample drug.
03:23Let's just say generic Cialis, Tadalafil.
03:27And you put in, guys, feel free to go along.
03:29And you go to costplusdrugs.com and you put in Tadalafil.
03:33When it comes up, we actually show you our cost.
03:36And let's just say in this particular, well, I'll skip that part.
03:40So we'll show you our cost and we show you our markup, which is 15%.
03:44And then because this, you know, if you want it mail order,
03:47then we have to have a pharmacist look at it.
03:49So it goes to a pharmacy, our pharmacy we partner with.
03:52They look at it, that's five bucks.
03:54And then we ship it, that's another five bucks.
03:56And so because it's only a 15% markup, our prices are dramatically lower.
04:02And the other part of, so going back to Tadalafil,
04:05let's just say a big bag of M&Ms is about $19.
04:10A 90-day prescription to Tadalafil is about $14.
04:16So you decide what you want in a bowl next to your bed.
04:18But again, that's costplusdrugs.com.
04:25We're trying to do all we can to improve the birth rate in America.
04:30Now that's not, you know, it's a cost savings and it's great
04:33because, you know, you can see, you know, that might take the cost.
04:36Typically, if you're buying Tadalafil from $40 or $50 or $80 down to, you know, less than $20.
04:41But in this industry, because it's so opaque, you have big company,
04:46these big pharmacy benefit managers that you may have read a fair amount about recently.
04:51They invent all these special categories.
04:54So they create this category called specialty pharmacy.
04:58Now, for most of the drugs in specialty pharmacy, including generics,
05:02there's nothing special about them.
05:03They're just pills, but they're special categories like chemotherapy drugs, like imatinib,
05:09like leukemia drugs, like muscular, multiple sclerosis drugs, you name it.
05:16Those are considered special.
05:17And because they're considered special, a drug like imatinib,
05:21before we got in the business, they would charge $2,000 for a 30-day supply.
05:25We came in and cost plus 15%.
05:28Now it's about $21.
05:30I'll tell you the story to make it a little bit easier to explain it.
05:34I had a friend from college who was in this horrific car accident.
05:37And a mutual friend of ours emailed me last year.
05:39And he said, look, Landon, he lost his insurance, and he needs this drug, droxedopa.
05:44And they're going to charge him $10,000 every three months.
05:47Can you guys get this?
05:48Because I didn't see it on your list.
05:50We checked into it.
05:51We got it.
05:52And we're going to charge him $10,000 every three months.
05:55Can you guys get this?
05:56Because I didn't see it on your list.
05:58We checked into it.
05:59We got it.
06:00Instead of $10,000 every three months, it was $180 every three months.
06:06And now we've got it down to about $90 every three months.
06:10And so you've got an industry where it's just a mess.
06:13And given you guys all work for, you know, probably bigger companies,
06:18I just have to say this, you are getting forked up, right, in your benefits programs.
06:25Because the same pharmacy benefit managers that are taking advantage of people with high
06:31deductibles, with high coinsurance, with high copay, they're taking advantage of your benefits.
06:39You know, just a simple task for you guys to do with your HR person, your CFO, or your CEO,
06:46go and have them talk, go to costplusdrugs.com and take your most expensive generics.
06:51Because most of our drugs are still generics.
06:53We're adding brand drugs as we speak.
06:56And just take your most expensive ones from your claims programs, your claims processing.
07:02And compare in price.
07:03I guarantee you, they're not going to tell you what the price is.
07:08You ask them for all your claims because you probably don't get them.
07:12And they'll say no.
07:13You'll say we want to compare the price you're charging us, particularly if you self-insure.
07:18And they'll say no.
07:20And if you think about it, this is your self-insurance or your insurance plans,
07:26and you as the employer want to know what you're paying.
07:29Well, Mike, you experienced this yourself as the owner of a basketball team, did you not?
07:33Yeah, so when I first started on costplus, I looked at the MAVs,
07:38and we took our highest price generics, and over an 18-month period,
07:44and we spent $160,000 through our insurance company.
07:47I then compared it to what it would have cost at costplus, $19,000.
07:52And just time and time and time again, I don't even know anything about your companies.
07:58I don't know anything about your HR.
08:01But unless you have more than 500,000 employees,
08:05you have no idea what you're spending on medications at your company.
08:08Now, Mark, the setup that we have, the kind of conventional, the status quo,
08:13the thing you're trying to disrupt, are these things called PBCs.
08:16Are these things called PBMs, right?
08:18Pharmacy Benefit Managers.
08:19And that system was supposed to help there be some price competitiveness.
08:27What happened?
08:29So the original goal of the pharmacy benefit managers made perfect sense.
08:33You have an organization that works with a bunch of companies and insurance companies
08:39and says, you know what?
08:41Let me aggregate all the demand that you have for prescriptions.
08:44And I'm going to go to the pharmaceutical manufacturers, and I'm going to negotiate
08:47for you.
08:48Makes perfect sense.
08:50But then what happened is these pharmacy benefit managers wanted to grow more.
08:54So they bought the insurance companies, or the insurance companies bought them.
08:58And then they bought retail pharmacies.
09:01And then they bought specialty pharmacies.
09:03And now they're even trying to do some things with manufacturers
09:06so that they're completely vertically integrated.
09:09And so when you have your HR people go out to bid through your consultant, and they say,
09:18well, look, there's three big companies that control 85% of the market.
09:22It's like the old thing, nobody ever got fired for buying from IBM.
09:26Your consultants just charge you money to tell you, you might as well buy from these big three.
09:30But now that they're completely vertically integrated, they think they don't have to
09:35give you the best price until we came along.
09:38And really, the most important thing that we've done to change the industry,
09:42and it wasn't even completely intentional, we published our full price list.
09:47You know, like I said, you can go in there and look up generic Cialis, generic Viagra,
09:51whatever, Imatinib.
09:53But we published our full price list of 2,500 drugs so that companies now can go down the
09:58list when they can see their costs.
10:00Or more importantly, their employees can say, wait, my co-insurance or my co-pay is $40.
10:09Or $50 or $100 if it's an expensive drug, but I can buy it from Cost Plus Drug for $15.
10:15How is that even possible?
10:17Quick question for you about that.
10:18So we've been talking about generic drugs this whole time.
10:21What is your plan for branded drugs?
10:23We're ready to sell brands, but those big PBMs, they're telling, so there's this thing
10:27called a formulary, right?
10:28And what a formulary is, that's the list of drugs that the employer or the insurance company
10:35negotiate with the PBMs to be able to offer all your employees or the insurees.
10:40And to be on that formulary is really important for drug manufacturers.
10:46It's like an NCAP at a retail store, right?
10:49Because if you're not on there, then all the people who are buying insurance from the insurance
10:54company that owns the PBM, if you're not on that formulary, you can't get access.
10:58You won't be able to fill those scripts.
11:00So the big PBMs, those big, the biggest PBMs are going to manufacturers and say, if you
11:06deal with Cost Plus Drugs, we're going to diminish your positioning on the formulary,
11:11or we're going to remove you completely.
11:13Is there anything to be done about that?
11:14I mean.
11:15Yeah, we're doing that.
11:16It takes some time.
11:17I mean, is it legal?
11:19No.
11:19But do you think the pharmaceutical manufacturers are going to, you know, cut off their nose
11:23to spite their face and say, yeah, that's exactly what they're doing?
11:26They'll tell us, like Andy said, if you're in private conversation at a table, you say
11:32something, you know, only if both parties agree, they'll tell us all day long this is
11:37what's going on, but they're not going to say it publicly.
11:39Right.
11:39Quick question.
11:40One more quick question about this before I kind of change gears a little bit.
11:44Revenue.
11:44What was the revenue for this company last year?
11:46Actually, I'm not going to tell you our revenue, but I'll tell you, we just had, I just saw
11:49our numbers, we just had our biggest month ever.
11:51So yeah, it's up and to the right like it's supposed to be.
11:54Right on.
11:54Okay.
11:55Um, look, uh, national news around the United Healthcare CEO.
12:01Yeah.
12:03And with all that, to pick that apart a little bit, it touched a nerve in this country.
12:10How should the health industry interpret that moment moving forward?
12:15Because you're trying to disrupt one part of it.
12:17Yeah, it's brutal.
12:19But let me, how many of you work for companies or run companies that self-insure?
12:26Just a couple.
12:26Okay.
12:29The, when you sign a contract for insurance, whether it's in your own plan, whether it's
12:36ACA, whatever it may be, even Medicare, you tell the insurance company what you want to
12:43be on the formula and what you don't want to pay for.
12:48And so that's the pre-authorization and that's the pre-authorization process.
12:54And now with Medicare Advantage becoming so prevalent, um, those networks are shrinking
13:01and there's more and more pre-authorizations going on.
13:04And companies are trying to save money.
13:07And, you know, you're trying to, you know, determine personally for your family, how
13:11much of a premium you want to pay and what deductible you want.
13:14And all those go into the process of deciding what is going to be approved and paid for.
13:20Yeah.
13:21And so the insurance companies rightfully so are getting a lot of help because 18% of
13:27the claims that they get, they deny and half of, and 99% of those that are actually are
13:33challenged get approved.
13:34Yeah.
13:35Which means it's just bullshit.
13:37And so if whatever you do now, and so I guess my biggest point first is we as consumers
13:45and we as companies have more control over the insurance companies than we realize.
13:50Because it's been so opaque up to this point, everybody realized the insurance companies
13:54have all the power.
13:56They don't.
13:57And so if you, when you look at your, um, the plan that you're looking at or your company
14:04sets plan options, um, or you look at the ACA program, look to see what the pre-authorization
14:10and the denial issues are.
14:13Because you can control and you can limit those so that you don't get stuck nearly as
14:17much.
14:17Now you're going to pay a little bit more, but being in that pre-authorization.
14:22So that's part one.
14:23Part two is, I really think that, you know, Congress is going to step up and do something
14:29about denials and pre-authorizations and all that.
14:32Um, it's just too political and it's just.
14:35This year?
14:37I don't, I, who knows?
14:38Yeah.
14:38Please predict the future for us.
14:39Yeah.
14:40Who knows?
14:40But it's certainly something.
14:42PBMs and, and healthcare and insurance are certainly going to be a topic that are going
14:46to, that are going to be front of mind.
14:48Understood.
14:48Okay.
14:49Um, we had a very, very successful fortune brainstorm AI last month in San Francisco.
14:55It was fabulous.
14:56There is not a brainstorm gathering that we have now that I cannot mention the two letters
15:02A and I, um, you invest in a lot of things, health and otherwise.
15:09Where do you think we're, we're talking about value with cost plus drugs.
15:12So where do you think the value in AI will come from that could be narrowed to the health
15:18category or beyond?
15:19Everywhere, everywhere.
15:21I mean, there's not anything AI won't touch.
15:26And so I think I've, I've been in tech way too long.
15:29I mean, I remember when PCs first came out and then I had a company, all we did was connect
15:33PCs and it back then it was like, oh, this is changing everything.
15:36And it did.
15:37Um, remember the early days when spreadsheets first came out?
15:41I do.
15:42Um, and then we went to the internet and I started a company that was the first streaming
15:46company.
15:47And it was like, wow, this is going to change a lot of things.
15:50None of those things compare to AI, you know, and along the way, we all figured we had to
15:57learn these new technologies.
15:58Remember you had to learn how to use your mobile phone and, and apps and be smart on
16:03your smartphone.
16:04We had to, you know, learn how to, um, use streaming and, and, um, zoom and all these
16:11different applications.
16:12It's just a nonstop progression.
16:14AI can just do more things than any of them.
16:17And so like at Cost Plus, we have, you know, there's still doctors who fax, literally fax
16:23prescriptions.
16:25And so we use AI to, you know, take a, take a picture of the facts and read, you know,
16:31the whole thing.
16:32Not, and unlike OCR, optical character recognition and old school way, computer vision, it actually
16:38takes all the data and puts it right into the exact process.
16:42If you have a new, you know, app, um, Apple iPhone with 18.2, the whole reason that was
16:47so important to them is what they call agents, right?
16:51They want you to say, Siri, make me a reservation for dinner at 8 PM at my favorite restaurant
17:01for four people.
17:02And it'll do it.
17:03And from a corporate perspective, all the things of capturing data and finding needles
17:09and haystacks, looking for trends.
17:12If you're able to stuff all those into what's called a large language model, then you're
17:16able to just ask a question.
17:17Sure.
17:17So we'll, we'll throw all of our information from Cost Plus into, well, like now I told
17:24you to go to costplusdrugs.com.
17:26If you go to chat GPT and say, what's the price up to Diliphil on costplusdrugs.com?
17:32It'll just tell you.
17:35Sure, sure.
17:37There's nothing that's not going to touch.
17:40So let's go to the audience for questions.
17:43These lights are very, very bright.
17:45So you'll have to hold your hand very high.
17:46I see one straight to the back.
17:49Please, your name and who you're with.
17:52Hi, Joel Myers, founder and executive chair of AccuWeather.
17:57A question for Mark.
17:58So with these innovations that you're doing and with Doge and so on, and of course, the
18:04fact that healthcare costs have been rising seven to 10% a year forever, what do you think
18:10healthcare costs are going to be three, four, five years from now?
18:15If I had my way, they'll be down.
18:18Because a lot of the issue is there's overlapping on the healthcare side in incentives.
18:26So for instance, we're talking about the insurance plan that you pick.
18:29Well, you make the decision how much your deductible is going to be.
18:33But who takes the credit default risk on that deductible?
18:37The hospitals do.
18:39Now, that makes no sense whatsoever.
18:42Then you look at your insurance company and the hospitals and doctors that you work with.
18:46They negotiate.
18:48You would think they can negotiate a great price.
18:50But if you walk into a hospital and say, I want to pay the cash price versus the negotiated
18:59price by the insurance company, your insurance company negotiated, it's going to be cheaper
19:03with cash.
19:04And so what I'm focusing on for my companies is we're doing direct contracting with providers.
19:12And what we're saying is we're going to trust the doctor.
19:15There's no preauthorizations.
19:17There's no deductibles.
19:18There's no copay.
19:19There's no insurance, coinsurance.
19:21We'll pay the whole thing.
19:23In exchange for that, I want you to charge me your cash prices are lower.
19:28And we're getting them to say yes.
19:29But that's not the interesting part.
19:31The interesting part is once we have those contracts done, which we've got some sign,
19:37we'll have more sign this year, we're going to publish them all.
19:40So that rather than it being opaque and nobody understanding how all these pieces fit together,
19:45we're going to publish them.
19:46And AccuWeather and anybody else who wants to use them can use them.
19:51Right on.
19:51All right.
19:53Yes, right all the way in the back.
19:54Yes, thank you.
20:00Pankaj.ai.
20:01I'm an AI investor.
20:04Mark, I look up to you.
20:06Oh, thank you.
20:0715 years, $60 million invested, and you recently said it was a net loss.
20:18No, OK, so let's just stop you right there.
20:20So what he's saying is I did an interview two years ago, and these guys, the NILK boys
20:25here in Vegas, said, how are you doing with Shark Tank?
20:27I said, on a cash basis, I'm getting B.
20:32But on a mark-to-market basis, I'm getting C.
20:35But on a mark-to-market basis, I'm killing it.
20:38So people do, they say, OK, they run with it.
20:42Oh, Cuban lost money on Shark Tank companies.
20:44I put a million dollars into beatbox beverages, and I got a third of the company.
20:49I've been diluted some since, but they raised money at over $200 million this year.
20:54I gave $200,000 for, I think, 20% of Dude Wipes.
20:57Anybody ever seen Dude Wipes or use Dude Wipes?
21:0020%, $200,000 for like 20%, they're worth $300 million.
21:06So there's Mush, there's Game Day Gator, all these different Shark Tank companies that
21:14are worth over $100 million that I own a chunk over, but I don't count that because it's
21:18not cash.
21:19And so if I did it probably like you do your investments, you have investors in your fund
21:24or whatever, you mark them to market, right?
21:27There you go.
21:28I did mark-to-market, I'm fucking crushing it on a market.
21:31Thank you for your question.
21:35All right, last one over here, quickly, back to you.
21:37Hey, Mark, eggfansincetobroadcast.com, Dave.
21:40Appreciate that.
21:43My name is Steve Wolf, I'm the CEO of a vertical AI company called Alpha and Company.
21:47And I'm curious, when you look at the average age of a board director, it's about plus or
21:51You've said that there are going to be two types of AI companies, those that are great
21:56at AI and everyone else.
21:58And so I'm so curious, when are corporate boards going to get religion about AI?
22:04I hope never, so I can just kick those companies ass, you know.
22:08Seriously, it's a competitive advantage if they don't adjust.
22:11You know, I truly believe it's like I said, going back in our day, we didn't have AI.
22:17If they don't adjust, you know, I truly believe it's like I said, going back on all the technology
22:23enhancements that we've had over the last 40 years.
22:28Every time someone said, oh, we don't need it, everybody, but you had to learn it.
22:32It's just not ever going to change.
22:34Technology is going to keep on marching on.
22:36But that's the beautiful thing about this country.
22:40We're like the technology dominant country in the world.
22:44And we want everything that we possibly can do to keep on pushing that forward, because
22:49that's what makes us different.
22:52That's part one and part two.
22:54What makes this country different than every other country in the world?
22:57We're a country built on entrepreneurs.
22:59When you go to Spain, the UK, there's not everybody talking about that company they're
23:04dreaming of starting.
23:06That's what we have here.
23:07So when I hear about, you know, bigger companies with set boards and they're all older, I'm
23:11like, fine by me.
23:13That's an opportunity.
23:16And so if you're competing with them, great.
23:18If that's your company, you know, it's time to sit down with them and say, okay, guys,
23:24women, it's time to change.
23:27I'm going to steal the last question for myself.
23:30I'm not going to let you sit here and not ask a basketball question, you know?
23:34Be careful.
23:34We lost tonight.
23:35Yeah, I know.
23:36I know.
23:36I'm sorry.
23:37I'm sorry.
23:37You know, it was a tough one.
23:39I would love to know what you think the NBA should do to increase viewership.
23:44So that's an interesting question, right?
23:46Because people use ratings as a metric for success.
23:51But at the same time, we say linear television is dying.
23:55It can't be both.
23:57You know, like on Shark Tank, Friday nights on ABC, my last season, watch early, watch
24:02often, catch the reruns on CNBC.
24:05When I first started 15 years ago, we had 4 million people watching.
24:10Then we got up to 9 million people watching maybe 8 years ago.
24:14Now, if we have 3 million, that's great.
24:18And I remember them telling us we have to have a 2.0 in the 18 to 49 demo.
24:23That's the advertiser-rich demo.
24:26Now, if we have a .3, that's great.
24:30And last year, it was a .5, and that was great.
24:33The NBA, with our worst games, tops all that, right?
24:38And it used to be inconceivable that a game on cable would beat any broadcast television,
24:45any show broadcast on broadcast television.
24:47Inconceivable.
24:48Shark Tank used to just destroy the NBA in 18 to 49.
24:52But even more importantly, the way kids consume content now, like I have a 15-year-old son,
24:58and he doesn't watch the whole game.
25:01He watches the highlights over and over.
25:03What did Luka do today?
25:04What did Kyrie do today?
25:05What did Steph do today?
25:06What did Derek Lively do today?
25:07And they'll just watch.
25:08And it's just, you know, because of the algorithms in our social media,
25:11whether it's YouTube, Instagram, you know, I'm on Blue Sky now.
25:14That's my new favorite.
25:16You can all follow me on Blue Sky at M Cuban, and I answer a lot more questions than Twitter.
25:20Twitter's a shithole these days.
25:22But the algorithms that just keep on showing.
25:26So, if you're into sports, like, you just see highlights continuously.
25:30And I say that because as we move at the NBA to online streaming more than linear,
25:38you're going to start to see us do what Netflix does,
25:43where it doesn't give you a rating, per se.
25:45It shows you total minutes consumed.
25:47And if you look at total minutes consumed by the NBA, we're crushing it.
25:52We get, I mean, our viewership numbers on, you know, Instagram, you know, YouTube, etc.,
25:59TikTok, blow away the NFL.
26:02All right.
26:03Enough said.
26:03There you have it.
26:04Mark, thank you for being with us tonight.
26:06Thanks for having me.
26:08Thanks.
26:08Appreciate it.