The a16z Show - Curing the Trust Problem with Mark Cuban

Episode Date: July 12, 2023

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. Listen to our last two episodes on Healthcare x Fintech:When Two Giants Intersect: Healthcare Meets FintechHow Fintech is Reshaping Our $4T Healthcare Industry Stay Updated: Find a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease note that 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. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that 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. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

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. Here at the A16C podcast, we have covered the American health care system a lot recently. And for good reason. If you miss those episodes, we covered how FinTech and Fentuck and 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 learnings here for founders in other industries. This is also a crossover episode from our sister podcast, BioWeets 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 BioWeets World wherever you get your podcasts. All right, Olivia, Vijay, Mark, take it away. Hello and welcome to BioEats World, a podcast at the intersection of bio, health care, and tech. I'm Olivia Webb. 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, founding partner of A16Z Bio and Health. Together, they talk market forces in health care, the importance of trust to patients, and Mark's ideas to tackle the Gordian knot that is American healthcare. Let's get started. Mark, thank you so much for joining us. Thanks for having me, Vijay. 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. Yeah. 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? 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 and they're asking him for a new pair of basketball shoes. I was a basketball junkie all the way back then. He was like, you looked at my feet.

He goes, those shoes look like they work. When you have your own job and you can afford it, you can buy your own. I'm like, bad 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 him in my little wagon, right? And I would literally walk around and you'd hear,

hi, my name is Mark. Do you use garbage bags? You know, and who's going to say no to a 12-year-old version of this face? 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 go to one dealer in one part of the show. I picked something up, I think was for 50 cents. Went over and said, look, based off of this catalog, this is this stamp, which is $50, I'll sell it to you for $25, and sold it for $25. And I just kept on ramping that up and ramping that up. And that helped me pay for a bunch 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 so it just all just kept on going. And I think 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 once you understand that, the opportunities are everywhere. But along the way, too, you've also had to, like, build teams, right, whether we're talking

about the Mabs or we're talking about companies along the way. I'm curious if you have lessons for current entrepreneurs and training for taking, especially a bunch of brilliant, like, high-performing people, but how do you get them to work together? When you have a vision and you have a goal and you can align everybody towards that, it's really not hard to get gifted people to come along, even, you know, maybe take less than market wages if you give them equity opportunities. And I think that's really where I was able to to really succeed with a lot of the companies that 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 80 employees, and so there were a lot of really happy people at the time. You know, broadcast audio net turned into broadcast.com, and when we sold it for stock, Yahoo, out of 330 employees, 300 became millionaires, at least on paper at the time. We kind of told them to hedge everything. And it just went on from there, HDNet, the same thing when we sold that. And so when everybody's a participant, everybody is aligned, and you can get people'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. But 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. And that makes it a lot easier to have a culture that's geared towards the success of your

organization and everybody's participating in that upside. Yeah, that cultural part seems like a huge deal. How much you feel like that comes from what you build versus geography, you know, versus how you pick the people? How have you built it? I think geography has a lot to do with it. Just the night guys, the mindset here in Dallas, is night and day different than New York, L.A., you know, San Francisco, the Bay Area.

just totally different. Whereas when I'd go into the Bay Area and the Valley, it was always, hey, we're the smartest. You know, we're dealing with you. We've got an edge. And that 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 bases are for however many opposite is geography will have an impact on your culture you just have to it's just a reality yeah that makes total sense so one last question on sort of the the founder arc uh what advice would you give to your younger self like what do you wish someone told you i know there's often not a civil bullet but i'm sure

you've thought about it i would say don't screw it up 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. You're going faster 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 still right now in this market.

And so gearing towards profitability, I think, is a message along with, you know, being curious, learning, selling, et cetera. What brought you to the health care? Like, why healthcare of all the things, you know, you could be doing? 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 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 in. 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. Alice Ashmianzki, who was a radiologist by training, who was super smart. And he was starting a compounding pharmacy in Denver. And the goal was to be able to take generic drugs that were in particular on a shortage list. Shockingly enough, there are generics that go on shortage lists, 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 Deriprim 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? TCPI stacks, every name, right, in different language. It is nothing compared to the pharmaceutical industry. The pharmaceutical industry has 50 different

acronyms for a price, you know. 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 health care, 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 really was the genesis of costplus drugs.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? API stuff and website stuff. But it took us a while and then it took us time to get everybody to believe that we were real. We weren't just the next company, you know, making big claims. And that's why I put my name on it.

And it's the only company I 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 costplusrugs.com, you can look up to see, or if your medications 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 health care? It's hard to have market forces when there's no transparency, and people don't even know what the price of it is.

You know, if you think about the process of getting a prescription, the doctor says, you need this medication. And the next question isn't, what is it cost? What's the best way? Next question is, what pharmacy do you use? And then you go to the pharmacy, and you hope your health care insurance covers everything that it needs to cover, covers. If you're a big company, you all probably already know. If you're a middle-sized company,

you may not know if you're a small company or an entrepreneur or individual market enrollee. You're terrified. You have no idea what'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 inconsistent fees in this completely opaque industry. And so it was ripe for disruption. And the business model was very simple. We buy drugs. We sell drugs. And when you go to cost plus drugs.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 matinop. 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 mat number or any of our medications, you see our cost. You know exactly what we pay for it. You see our markup, 15%. You can decide if that's fair or not. You see our pharmacy fee.

Right now it's $3. 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 researchers 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 say the taxpayers, $3.6 billion a year. A couple of urologists at Vanderbilt did the same thing for, I think, seven urology drugs, and it was $1.2 billion a year. Our government officials at Medicare, CMS, et cetera, just really never had reference pricing that was legit that they could use. And by providing that, again, engenders trust and opens people's eyes that were the real deal.

Originally, it seemed like this was going to be about generics, but you recently signed a deal for two non-generics. What does that look like and where you keep on going? What's the future look like? Fundamentally, there are a couple problems that pharmaceutical manufacturers have. And it's easier for generic manufacturers to deal with them because typically, not always, but typically for a generic medication, there's competition. So we could go in there and, you know, even at lower volumes, at least find one of the

competitors and have the opportunity to sell it. So the generics were the low-hanging fruit for us to get started. But they also, when you talk to generic manufacturers, they feel demonized as well. Brand manufacturers definitely feel demonized because when anybody talks about the price of medications in this country, oh, it's the pharmaceutical industry. It's the manufacturers that are the bad people that are jacking up the price. Look at insulin without realizing, you know, the retail price of a violent incident that may have been $300 some, but the net revenue to Lilly, and it's clear in their quarterly earnings conference calls

as 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 customized. 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 Jansen, part of J&J, and we've been working on this for Invocana 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. What's the grandest vision of this? Do you become a PBM?

No. Well, in essence, we could become a PBM, but we'll work with any PBM that doesn't do rebates. So MSNA 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 and 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 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 chain's 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 or 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. 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. 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-bate 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 rotor-ruder kind. And so I went to local hospitals and looked at all the price lists, which are online. And it's insane. So the biggest insurance companies for CT colonoscopy, and they show all the different deals and everything,

each insurance company got multiple deals with that same hospital, 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 going to fail. 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 health care costs for a provider to deal with the administration and revenue collection and revenue identification and call it a market force able industry. You just can't. Yeah, aligning incentives of profit and patients' well-being makes a ton of sense.

A health care operating system that reflects the current operations of health care is doomed 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 follow 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 don'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 the UFOs of major hospitals what accounting, what cost accounting they do. None would participate. Yeah, and so you're speaking to like the bigger problem of like misalide 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 for it? If you go to the origins of pharmacies in 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 health care 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 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. 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 health care. 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 health care, even though you use it. Medicare cost reports can be used for analysis, et cetera. But the reality is it's just a cost associated with generating revenue from the insurance companies.

And those insurance companies change those contracts every year. They change the networks that you need even more administration. So you've just got to say, slice those out completely. You're describing like healthcare driven by consumer courses then, like where consumers are of the customer, instead of basically the payers being the customer. But it's got to be more of a Netflix model, you know. Tell us more, what do you mean my Netflix model?

Meaning that, you know, whatever Netflix has in their library, you get for what price? Yeah. 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 that needs to support itself,

then the community knows, let's just say pick a number out of the year. It's $100 million a year for fixed overhead and estimated variable costs. So we have to generate $100 million this year, $110 million next year, just 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, you know, local businesses, local people, and say, okay, how do we create $110 million to support this community? And once you extract all the other Mishigas, right, all the overhead that's associated, that's designed 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 have one thing. It's got to be 100% transparent. Right. 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 talking about more transparency for salary 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 health care, just like we started showing our prices, our costs, that's what it's going to take. to extract all the ancillary costs that aren't aligned with better patients or better patient outcomes or better costing. And the only way to do that is to just extract the way payments are done today. 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 it for everything, but like in that type of world, you don't get paid for innovation. You just get paid for doing the services. Sure you do. So right now, like with specialty drugs. It might be $3.5 million for a hemophilia drug, right? And, 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're only, you've priced this expecting to only sell it to a thousand of them. That's why it's $3.5 million. 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 those who are and pricing it to deal with that curve. 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 world where they're designed, where you have platforms that can actually go after a variety of things. And 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? 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. 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 learning from a knowledge base to know what you need and the best application of your innovation and dollars, right? And so there's no centralized source of information. Everybody wants to sell that. And so there's ways to get there.

But again, transparency sometimes is the most innovative. element in an industry where it's completely opaque. Yeah. Well, what you're describing sounds almost like Amazon Marketplace for Drugs or something like that, right? Yes or no. Early, you know, Amazon 1997, yes. Right.

Amazon, 2020, completely different. 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. Maybe it started the blue skies from the beginning. Like, what are the things that we need to change to sort of get to U.S. healthcare going to where we all want to go? I mean, I think our collective dream is for it to be the best health care in the world.

But I don't think we feel like we can't say that today. What are the changes when we're talking about policy, business, or otherwise? But I have a feeling policy would be a key part of it. Actually, I think it's going to be hard simply because right now, right now, 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. And debatedly, solving problems doesn't like really gain political points, right?

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 health care 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, then 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. Open GL, complete transparency. Yeah. 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. Well, how would that change the game? Like you wouldn't be able to hide?

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 go bam, bam, bam, bam, bam, right? And understand where things are going. But so that won't help them. 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 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 big number. Oh, it's a huge world.

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 audience a bit more about it and like, where is that going? Like it was an intriguing idea. As I mentioned earlier, that when the Republicans came in and we're 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 tamp down tuition or cost. You can always borrow. And guess what? Costs go up, like really fast. Really fast. And that's the same problem with single-payer health care.

One, the government funding, 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 can see every four years, 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, that doesn't sound like capitalism to me.

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 10 plan. But then who would pay for it? 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 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 one 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 saved like $17 billion a year or something. I forget the exact number. And it would have been nice, but getting it

implement, you know, I went to D.C. and talked. It was no chance. But I learned a lot. I learned a lot. Is there any optimism you have for like what's going to happen in politics or health care? Like no. Anything? No. No. 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? 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 NADAC. There's this. There's ASP.

There's all these other things. And that the PBMs used 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 an, you know, it's an inflated, invented number, and it only looks good to people who really haven't looked at absolute dollars, 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. Perhaps those are the first real market forces we need to have as foundations. You apply the same thing to hospitals and providers.

You have to come out with your actual cost, and here's how you have to define how you how you burden those costs, you know, for very, you know, so you burdening your fixed cost 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 years ago, right? It makes no sense, but then you start to realize Canada pays for malpractice insurance.

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 overpaid to get something. But there was no multi-pricing within a province, right, by an insurance company. And so 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 each line item? I haven't seen it if it's there. 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? So first of all, I write down everything I eat. You can go to my fitness pal and my username is Mark Cubans. 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'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 rest of the lakes at night. 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. 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 told and all that.

Yeah, fair enough. No young blood. No young blood. No young blood. I'm kidding. Absolutely kidding. Yeah, yeah. So three quick lightning questions, and I think that'll take us home.

So first off, you know, of all the businesses you've bought and run, what's your favorite? 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 it 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's why this is the only company I've ever put my name on, and that's why.

Great. Who annoys you more PBMs or NBA officials? NBA officials. At least I know what, would. CBMs are due or 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.

MBA officials, I haven't been able to understand it for 23 years. This cost me a lot of money. 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 at Luca or Dirk? 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 Maveridge. I'm Mark Cuban. Thank you so much for joining us. Thanks, Bja. And I'll just say it again. Please go to cost plus drugs.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. 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 Hegeseth. BioWeets World is part of the A16Z podcast network.

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