Pod Insights a16z Podcast Curing the Trust Problem with Mark Cuban About this episode 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.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 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 one of the big three retailers, pharmacy retailers, you might pay $2,000 a month. Our price is, depending on strength, $14 to $61 a month. It's just insane, the discrepancy. 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. That's it.
0:43 Steph Smith? 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 two episodes, we'll link them in the show notes. But today, we have one 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
1:26 Steph Smith? 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.
1:56 Speaker 02 Hello and welcome to BioEats World, a podcast at the intersection of bio, healthcare and tech. I'm Olivia Webb.
2:09 Speaker 02 Today's episode is with Mark Cuban, founder of multiple businesses, owner of the Dallas Mavericks, one of the Sharks on Shark Tank, and co-founder of the Mark Cuban Cost Plus Drug Company. He is joined by Vijay Pande, 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. Let's get started.
2:36 Vijay Pande? Mark, thank you so much for joining us.
2:39 Speaker 00 Thanks for having me, Vijay.
2:40 Vijay Pande? 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. Like, you started business when you were 12.
2:52 Speaker 00 Yeah.
2:53 Vijay Pande? Like, I'd love to hear your take on that and like, what drove you to be thinking about business and startups and entrepreneurial behavior at such a young age?
3:01 Speaker 00 Necessity. You know, and in our household, if you wanted something, you had to earn it. And you mentioned being 12. I went to one 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. And he was like, he looked at my feet. He goes, "Those shoes look like they're work. When you have your own job and you can afford it, you can buy your own." I'm like, "Dad, I'm 12. How can I get a job?" And one 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." And so I did, put them in my little wagon, right? And I would literally walk around and you'd hear, "Hi, my name is Mark.
3:46 Speaker 00 Do you use garbage bags?"
3:49 Speaker 00 You know, and who's gonna say no to a 12-year-old version of this space? And so 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, you know, then it's just a question of picking up other skills. And then from there, I sold magazines door to door. But then, like, 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 one dealer in one part of the show. I picked something up, I think it was for 50 cents, went over and said, "Look, based
4:33 Speaker 00 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, you know, and so it just all just kept on going. And I think that the underpinning of it was, if you can sell, if you can recognize where there's 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 healthcare, that, you
5:17 Speaker 00 know, once you understand that, the opportunities are everywhere.
5:19 Vijay Pande? 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 and training for, sort of, taking especially a bunch of brilliant, like, high-performing people, but how you get them to work together?
5:36 Speaker 00 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, 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. You know, my first company, Microsolutions, we sold for six million. A million of that went to employees. We had eighty employees, and so there were a lot of really happy people at the time. You know, Broadcast, AudioNet turned into Broadcast.com, and when we sold it for stock to Yahoo, out of three hundred thirty employees, three hundred became millionaires, at least on paper at the time, and we kind of told them to hedge everything.
6:20 Speaker 00 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's 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, and but that that's one 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 and 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.
7:04 Speaker 00 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.
7:12 Vijay Pande? Yeah, that cultural part seems like a huge deal. How much do you feel like that comes from what you build versus geography? You know, versus how you pick the people? How have you built it?
7:22 Speaker 00 I I think geography has a lot to do with it. Just the the light guys, the mindset here in Dallas, it's night and day different than New York, LA, you know, San Francisco, the Bay Area, just totally different. Whereas when I'd go into the the Bay Area and the Valley, it was always, hey, we're the smartest. You know, we're dealing with you, we're we've got an edge. And that just it just when you're dealing with that, and I've invested in companies there, but you know, 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 your bases are for however many offices, geography will have an impact on your culture. You just have to, it's just the reality.
8:03 Vijay Pande? Yeah, that makes total sense. So, one last question on sort of the founder arc. What advice would you give to your younger self? Like, what do you wish someone told you? I know there's often not a silver bullet, but I'm sure you've thought about it.
8:15 Speaker 00 I would say, "Don't screw it up."
8:19 Speaker 00 Right? But you know, the interesting thing is, there's two 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 four 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."
8:49 Speaker 00 You're going fast with this, then they're typically going to go and you can't get mad. Or if you have, you know, I would get mad if I thought people didn't use my version of common sense. And so you can't do that, right? 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 so right now in this market. And so gearing towards profitability, I think, is a message along with, you know, being curious, learning, selling, etc.
9:30 Vijay Pande? What brought you to healthcare? Like, why healthcare of all the things, you know, you could be doing?
9:34 Speaker 00 I started about five, six 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. And, and so I was like, "Okay, that's great. What are you going to replace it with?" 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 that got me into it. And then about 20, late 2018, I think it was, maybe early 2019, I got a cold email from a Dr. Alex Oshmiany, 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.
10:17 Speaker 00 Shockingly enough, there are generics that go on shortage lists, you know, 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 deraprim 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, right? T C P I P, SPACs, there's every name, right? Different language. It is nothing compared to the pharmaceutical industry.
11:02 Vijay Pande? Yeah.
11:02 Speaker 00 The pharmaceutical industry has 50 different acronyms for price, you know?
11:06 Vijay Pande? Yeah.
11:06 Speaker 00 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 one missing element in healthcare, which is trust. No, 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?
11:51 Speaker 00 API stuff and website stuff. But it took us a while and then it took us time to get everybody to believe that that we were real. We weren't just the next company, you know, making big claims. And that's why I put my name on it. And 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 or if your medication is any of the 1100 plus we carry. And since then, it's just blown up. It's been insane. Well, what do you think about the concept of market forces in healthcare? It's hard to have market forces when there's no transparency and people don't even know what the price of it is. You know, if you think about the process of getting a prescription, the doctor says, "You need this medication."
12:34 Speaker 00 And the next question isn't, "What does it cost? What's the best way?" The next question is, "What pharmacy do you use?" And then you go to the pharmacy and you hope your healthcare 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 enroller, 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 unless, until it appears. And so, there's all these inconsistencies in this completely opaque industry. And so, it was ripe for disruption. And the business model was very simple. We buy drugs.
13:18 Speaker 00 We sell drugs. And when you go to costplusdrugs.com, you put in the name of the drug. One drug that we have a huge discount compared to everybody else is a chemotherapy drug called a Matnip. And if you were just to walk in and didn't have insurance, or high deductible insurance, and you walked into one of the big three retailers, pharmacy retailers, you might pay $2,000 a month. Our price is, depending on strength, $14 to $61 a month. It's just insane, the discrepancy. But when you go to costplusdrugs.com and you put in a Matnip or any of our medications, you see our cost. You know exactly what we pay for. You see our markup, 15%. You can decide if that's fair or not. You see our pharmacy fee. Right now, it's $3.
14:03 Speaker 00 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. And so, you know exactly what you're going to pay and why. And that's accomplished two things. 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 retailers 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 billion dollars a year.
14:47 Vijay Pande? Wow.
14:47 Speaker 00 A couple of urologists at Vanderbilt did the same thing for, I think, seven urology drugs, and it was 1.2 billion dollars a year. Our government officials at Medicare, CMS, etc., 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.
15:10 Vijay Pande? Originally, it seemed like this was going to be about generics, but you recently signed a deal for two non-gen generics. You know, what does that look like and where do you keep on going? What's the future look like?
15:19 Speaker 00 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 with, for a generic medication, there's competition. So we could go in there and, you know, even at lower volumes, at least find one 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, and 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.
16:01 Speaker 00 Look at insulin without realizing, you know, the retail price of a violence that may have been 300-some dollars, but the net revenue to Lilly, and it's clear in their quarterly earnings conference calls, they talk about it, was in the 20s. And so initially, by working with generic manufacturers, that kind of proved the concept, allowed us to gain a base of customers. And talking to the brand-name manufacturers, they hate the system. They absolutely hate it. They're demonized, and they don't like the game of having to kiss up to the PBMs, the big three 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
16:46 Speaker 00 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 three PBMs... Don't want this to happen.
17:02 Vijay Pande? What's the grandest vision of this? Like, do you become a PBM?
17:05 Speaker 00 No. Well, in essence, we could become a PBM, but we'll work with any PBM that doesn't do rebates. So IMSA, 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. And they also own the big three pharmacy retailers. And so when we looked into it, our basic evaluation was these PBMs have at least
17:50 Speaker 00 200, if not 250 different subsidiaries. And so 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. So if regulation comes across where the PBMs can't do rebates, or they have to modify their rebates, reduce their rebates, they'll get it out of a copay 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 one 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 three companies talking about declining earnings or revenues.
18:34 Vijay Pande? We started our chat by talking about these arbitrage possibilities, you know, that you build 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.
18:51 Speaker 00 Because there's no alignment between patient outcomes and healthcare companies profitability. And there's a lot of discussion about accountable care organizations and value-based pricing. They've already failed. 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. And the baseline benchmark for that was from 1993. And it's never been, you know, it gets adjusted, but it's never been rethought. Is that the right way to do it? When you go, you talk about market forces, you know, this is too much information, but I decided this colonoscopy to get a CT colonoscopy, okay? And so, instead of the Roto-Rooter kind.
19:33 Speaker 00 And so, I went to local hospitals and looked at all their price lists, which are online. And it's insane. So, the biggest insurance companies for a 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 five different prices for each insurance company, for the hospital and their network. But, there's not an alignment with market forces or for profitability with the patient. It is doomed to fail.
20:18 Speaker 00 Insurance has failed. And I'm not here to tell you I'm for a single payer, I'm not. 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 40% of hospital and healthcare costs, or a provider, to deal with the administration and revenue collection and revenue identification, and call it, you know, a market force able industry. You just can't. 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
21:00 Speaker 00 to fail, because you're taking a broken model and replicating it and adding efficiencies on the margin. You know, I tried to get involved with the hospital here recently, and they went, followed through, I saw that they were for sale, it was small in North Texas, and all I asked for were the absolute cost and variable costs. I don't want to know about administration, how you code, I didn't want to know about, you know, 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. They wouldn't do it, couldn't do it. I tried to pay for a study that asked CFOs of major hospitals what accounting, what cost accounting they do. None would participate.
21:44 Vijay Pande? Yeah, and so you're speaking to like the bigger problem of like misaligned incentives, lack of transparency. But I agree with you about the limits of single payer, but then what do we have left? Like, what's the way forward?
21:57 Speaker 00 If you go to the origins of pharmacies, in, you know, the 1950s, pharmacies bought medications, they sold medications, they gave you advice, right, on what not to mix and match. And we went right back to that. 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, you know, here's our, 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. Well, we'll let the community decide what services retain and what services to add and the cost associated with it.
22:42 Speaker 00 That's what's going to need to happen. Now, think about what happens when you do that. You know, you guys are familiar with healthcare. There's medical coding, right? There's MCR, Medicare cost reports. There's all these things that are designed only to get revenue from the insurance companies. That's it. You know, coding isn't about better healthcare, even though some, you know, 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. And those insurance companies change those contracts every year. They change the networks that you need even for administration. So you've just got to say, slice those out completely.
23:20 Vijay Pande? You're describing like healthcare driven by consumer forces then, like where consumers are the customer, where instead of basically the payers being the customer.
23:28 Speaker 00 But it's got to be more of a Netflix model, you know?
23:31 Vijay Pande? Tell us more. What do you mean by Netflix model?
23:33 Speaker 00 Meaning that, you know, whatever Netflix has in their library, you get for what price?
23:39 Vijay Pande? Yeah.
23:39 Speaker 00 It doesn't say I can give you every movie, anytime, anywhere, every show. But whatever specialty, whatever value we can create from a, you know, a content perspective, you get for this price during this period of time. And it's a silly analogy at some levels, but it's true that if a hospital has X number of doctors for X specialties and they can offer it, and this is what the community feels it needs to support itself, then the community knows, let's just say, pick a number out of the air. It's a hundred million dollars a year for fixed overhead and variable estimated variable costs. So we have to generate a hundred million dollars this year, a hundred ten million next year just to break even, right? And we'll play to break even. Now, all of a sudden, you can go to the community, go to the city, state, county,
24:23 Speaker 00 you know, local businesses, local people, and say, okay, how do we create a hundred and ten million dollars to support this community? And once you extract all the other mishegoss, right? All the overhead that's associated, that's designed to, to hide and deflect and everything else, now you can start looking at a market-based model that truly works. And it's because it stays market-based because, well, and let me add one thing. It's got to be a hundred percent transparent.
24:53 Vijay Pande? Right.
24:54 Speaker 00 It's got to be a system where your general ledger is open and available 24 by 7 on a read-only basis to anybody who wants to see it. Think about what happens then. We're already in a world where people are talking about more transparency for salaries and earnings. So, you know, maybe some doctors might not feel comfortable with that, or nurses or janitors might not feel comfortable with it. Okay, don't work here. But if we're going to change healthcare, just like we started showing our prices, our costs, that's what it's going to take. You have to extract all the ancillary costs that aren't aligned with better patients or better, better patient outcomes or better costing. And the only way to do that is to just extract the way payments are done today.
25:37 Vijay Pande? Where is the role of innovation? And often, if you're in a sort of cost plus world, I know that's not what you're describing for everything, but like, in that type of world, you don't get paid for innovation, you just get paid for doing the service.
25:49 Speaker 00 True you do. So, right now, like with specialty drugs, it might be $3.5 million for a hemophilia drug, right? But the way they price that is knowing that out of the total addressable market of patients, there may be, let's say, 10,000 patients. They know that the insurance companies are not aligned with getting those patients healthy. They're aligned with not paying at all, and they're trying to laser and exclude them and push them to their patient programs, right? So, if that same hospital, or Medicare for that matter, could go to the creator of that new specialty medication and say, "Look, we understand that you've got to make a profit. And we also understand that there's 10,000 potential patients, and you've priced this expecting to only sell it to a thousand of them. That's why it's $3.5 million."
26:34 Speaker 00 Let's go that Netflix model again, and our little hospital here in North Texas, who might have a DMA of 100,000 people, right, will give you X amount of dollars. And if you take the same approach everywhere else, but for that X amount of dollars, we get as much of this as you need. Your marginal cost for that therapy might be $1,000, $5,000, $10,000. We'll even pay you your actual marginal cost. Just be transparent with us. Now for innovation, the risk mitigation side of selling what you've innovated on becomes a lot cleaner and a lot more applicable, right? Because the hard part of the innovation is how do you sell it? And how do you deal with the people who aren't ready to take on the new innovation versus
27:18 Speaker 00 those who are, and pricing it to deal with that curve?
27:21 Vijay Pande? You know, one interesting trends we're seeing in how drugs are being made is that it used to be that all drugs were kind of discovered, and we're moving closer and closer to a world where they're designed, where you have platforms that can actually go after a variety of things. To the extent you have a real platform, you can ask from the beginning, not just like, oh, what can I discover? But like, what can I go after? What areas would there be the greatest need? What are the biggest markets?
27:49 Speaker 00 You need good data for that, right? But think about how data is siloed right now. The insurance company now that's going to pay for it and has all the patient information and an aggregate basis across multiple hospitals and multiple providers, doesn't share it with anybody. The, one of the reasons cost plus drugs is getting popular with and will be popular with brand manufacturers is because we'll allow them to have a direct relationship with the patient. The way PBMs, the big three PBMs work right now is they charge them for any data. And so you can't learn from it because to do what you've suggested requires no learning from a knowledge base to know what you need and the best application of your innovation in dollars, right?
28:31 Speaker 00 And so there's no centralized source of information. Everybody wants to sell that. And so there's, there's ways to get there. But again, transparency sometimes is the most innovative element because in an industry where it's completely opaque.
28:47 Vijay Pande? Yeah. Well, what you're describing sounds almost like Amazon Marketplace for drugs or something like that, right?
28:54 Speaker 00 Yes or no? Um, early, you know, Amazon 1997, yes. You're right. Amazon 2023, completely different.
29:03 Vijay Pande? Yeah, fair enough. Well, I'd love to switch gears and like, talk a little bit about like policy and regulatory side of the world because so much of this gets entangled in there. You know, maybe it started in the blue skies from the beginning, like what? One of the things that we need to change to sort of get to US healthcare going to where we all want to go. I mean, our, I think our collective dream is for it to be the best healthcare in the world. But I don't think we feel like we can't say that today. What are the changes whether we're talking about policy, business or otherwise? But I have a feeling policy would be a key part of it.
29:37 Speaker 00 Actually, I think it, it's going to be hard, simply because. Right now, politics is so much about perception as opposed to reality. And we want to have a great headline as opposed to a great result because, you know, not long after the headline is released, people don't track what the results are.
29:57 Vijay Pande? And debatedly, solving problems doesn't like really gain political points, right?
30:02 Speaker 00 Right. And again, putting your hat on of the people who are being regulated, who is more agile, them or the government? Who's going to be able to find ways to retain? It's rare, if ever, that you see in the healthcare industry, people talking about having net reduced revenues for because of regulation. You know, it may be because of, you know, pandemic, et cetera, whatever. But people, you know, those people who run the companies that are going to be most impacted aren't afraid of the regulations and they lobby the hell out of it. And, you know, when you talk to our politicians, it's rare and difficult for them to understand it. So what do you do? You look for the things that are simple. You know, an example, again, that will never get passed,
30:47 Speaker 00 Open GL, complete transparency.
30:49 Vijay Pande? Yeah.
30:49 Speaker 00 Right? If you want to do business with Medicare, the general ledger for your company has to be online 24/7 for anybody to see. You know, never going to happen, but it sure would change the game.
31:01 Vijay Pande? Well, how would that change the game? Like, you wouldn't be able to hide?
31:04 Speaker 00 Well, yeah, you couldn't hide anything, which means, and because it's public, every CEO is going to be over the gun for every decision they make, which is, you know, and most people aren't going to understand what they see. But if you or I or any of us are looking at it, we're going to be able to bam bam bam bam bam, right? And understand where things are going. But so that won't help. But then you see, you can look at simpler things. So if you look at the, we referenced earlier, the contracts between insurers, the payers and hospitals. And the fact that there might be five different contracts for a particular item. And but more importantly, they change every year. You could say, one, you have to use a universal contract that every hospital has to use and every insurance company has to use. So you simplify the administration of
31:48 Speaker 00 it. You can say that you can only change it every two years and not every year. You can say that you can't change your network for some period of time. Those are the types of things that are low hanging fruit that, you know, again, might save 1% on the margin, but 1% in this world is a, is a big number.
32:06 Vijay Pande? Oh, it's a huge role. It's almost a quarter of our GDP, right? So 1% is enormous. You had some really intriguing plans, like your 10% plan. Maybe you could tell the aunts a bit more about it and like, where is that going? Like it, it was an intriguing idea.
32:21 Speaker 00 As I mentioned earlier, that when the Republicans came in and were talking about getting rid of the ACA, and I asked the question, what next? So I started talking to people. And really, single payer is tough because it's almost like the ability of kids to always be able to get a loan for school. When you have the ability to always get a loan, the universities have no reason to put, to tamp down tuition or cost because you can always borrow and.
32:46 Vijay Pande? Yeah. And guess what? Costs go up like really fast.
32:49 Speaker 00 Really fast. And that's the same problem with single payer healthcare. One, with the government funding, all the, all the providers are going to see it coming and the government's not a great negotiator. And two, when you read any of the single payer proposals for legislation, they always put the head of HHS in charge of it. And that's a political position. And so you could see every four years, it, it would just be really, really tough. So what I thought was, you know, to paraphrase somebody, I shouldn't paraphrase as a capitalist, but from each, according to his ability to pay.
33:20 Vijay Pande? Yeah, that doesn't sound like capitalism to me.
33:22 Speaker 00 No, I mean, but sometimes capitalism should be compassionate, you know, and I should. Be able to pay full freight and somebody who is under 2X the federal poverty level shouldn't pay anything at all. And that was the genesis of the TEN Plan.
33:37 Vijay Pande? But then who would who would pay for it?
33:39 Speaker 00 I would pay for all of mine. You would pay for all of yours. Somebody who's under the two times the federal poverty level would pay none. And then it would be graduated on a means tested basis. So if you made 220% of the federal poverty level, you might pay 2% of the bill. And then the balance would be paid by the federal government and it would accomplish a couple of things from the provider end. If every hospital bill is paid for, that cuts administration costs and results in less dish payments and all these other things. Their insurance, their malpractice insurance is paid for. And then the third thing was, it would be at Medicare rates. So anybody who would use this program would pay at Medicare rates. And so when you netted it out, it, you know, it saved like
34:22 Speaker 00 $17 billion a year or something. I forget the exact number. And it would have been nice, but getting it implemented, you know, I went to DC and talked, it was no chance. But I learned a lot. I learned a lot.
34:32 Vijay Pande? Is there any optimism you have for like what's going to happen in politics or healthcare?
34:37 Speaker 00 Like, no.
34:38 Vijay Pande? Anything? No?
34:40 Speaker 00 No.
34:40 Vijay Pande? Are you saying that there's no hope for government and so therefore we have to do it ourselves? Or what's the sort of?
34:45 Speaker 00 No. I was thinking like I was thinking a week ago. So in this past week, past week, I talked to a bunch of people actually in via the White House at CMS and CMS Innovation Center who are very receptive. And I'm trying to get them on the concept, particularly with medications of just absolute pricing. You know, because I'm talking about pharmacy pricing, there's wholesale acquisition costs, there's wholesale average costs, there's the NAD Act, there's this, there's ASP, there's all these other things and that the PBMs use to say, well, if my retail price is way up here, then I give you a 70% discount. That sure sounds nice, but the problem is, it's, you know, it's an inflated invented number and it only looks good to people who really haven't looked at absolute dollars.
35:30 Speaker 00 Because prior to cost plus drugs, there was no publishing of pricing. So they had no way to reference. I've tried to get them to say, let's just work from absolute pricing.
35:41 Vijay Pande? Perhaps those are the first real market forces we need to have as foundations.
35:46 Speaker 00 You apply the same thing to hospitals and providers. You have to come out with your actual costs. And here's how you have to define how you how you burden those costs. You know, for very, you know, so you burden your fixed costs according to every service that you offer. Because one of the things as I was working on the template, the things I did, I had somebody put together a comparison between a big Toronto hospital as best we could and a big New York City hospital. And real estate is more expensive in Toronto. Doctors and nurses get paid the same. Band-aids cost the same. Why is it that the top 35 procedures in Toronto, in many cases, were less than our Medicare pricing a couple of years ago? Right? It makes no sense, but then you start to realize Canada pays for malpractice insurance.
36:31 Speaker 00 You know, Canada makes sure that every bill is paid. There's times when you're going to have to wait, so things have to be scheduled. And so there's not the ability for someone just to come in and overpay to get something. But there was no multi-pricing, well, multi-pricing within a province, right? By an insurance company. And so there's, there's ways to get there. But it comes down to, like in Canada, they make a presentation to the province. Here's my cost. Here's what I need. There's none of that transparency in the United States of America. You couldn't go to any hospital that gets money from the government for anything and say, what are your actual costs? Down to, you know, each line item. I haven't seen it if it's there.
37:12 Vijay Pande? No, no, you're right there. So one of the questions that's been fun to ask our guests is what you do for your own health? You know, like, I don't know if it's working out, supplements, meditation, like, what's important to you?
37:24 Speaker 00 So first of all, I write down everything I eat. You can go to, you can go to MyFitnessPal and my username is Mark Cuban. If you want to see what I eat, you can follow me there. Two, I try to work out. I take this cardio fitness class right now that's kicking my ass, but I've been the best shape I've been in 15 years. So I do that. I play basketball. I'll relax with my family, but I, you know, I'm 64 years old now. So, you know, I either got to do it or it's going to do me. In terms of supplements, I only do the things that I know I feel impact my body. Right? So I've tried this and that and this, but I know I get restless legs at midnight. You know, so I take magnesium. I know I'm a vegetarian, so I take an iron supplement and eat a lot of total cereal because it has iron in it.
38:09 Speaker 00 I'll take melatonin if I'm not sleeping well. I don't do the NADs and this and that to try to increase the size of my telomeres. I'm still not old and all that.
38:19 Vijay Pande? Yeah, fair enough.
38:20 Speaker 00 No young blood, no young blood.
38:23 Vijay Pande? No young blood.
38:25 Speaker 00 Kidding, absolutely kidding.
38:26 Vijay Pande? Yeah, yeah. So three quick lightning questions and I think that'll take us home. So first off, of all the businesses you've bought and run, what's your favorite?
38:36 Speaker 00 This one. I mean, broadcast.com at the time was amazing because we started the streaming industry. Nobody knew what it was and people's eyes would just bug out every time they could listen to something they never had access to before. But when people walk up to you on the streets that, you know, just start hugging you and crying because now their mom or themselves or their granddad can now afford their medications. That, you know, that's why this is the only company I've ever put my name on and that's why.
39:03 Vijay Pande? Great. Who annoys you more, PBMs or NBA officials?
39:08 Speaker 00 NBA officials. At least I know what PBMs are doing, why PBMs do what they do. They're just trying to make as much money. They're all public companies, right? Get that stock price up. NBA officials, I haven't been able to understand it for 23 years and it's cost me a lot of money.
39:22 Vijay Pande? Yeah, I can imagine. And last one, and this might be a hard one for you, but like, okay, so imagine we're in 2040 and you're looking back, who's had the better career, Luca or Dirk?
39:34 Speaker 00 Oh my goodness. I think Luca has the ability to have a better career because, you know, he can rack up assists, but hopefully they mirror each other championship or multiple championships in 21 years with the Dallas Mavericks.
39:47 Vijay Pande? Mark Cuban, thank you so much for joining us.
39:50 Speaker 00 Thanks, Vijay. And I'll just say it again, please go to costplustrugs.com, put in the name of the medication you take or somebody you know takes. We don't spend any money on marketing. It's all word of mouth. So please check it out. I know we can save you money.
40:08 Speaker 02 Thank you for joining BioEats World. BioEats World is hosted and produced by me, Olivia Webb, with the help of the Bio and Health team at A16Z, and edited by Phil Hegseth. BioEats World is part of the A16Z Podcast Network. If you have questions about the episode or want to suggest topics for a future episode, please email [email protected] . Last but not least, if you're enjoying BioEats World, please leave us a rating and review wherever you listen to podcasts. The content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may maintain investments in the companies discussed in this podcast.
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