Show notes
Today's guest is Mark Cuban, the billionaire entrepreneur and former Shark Tank star who is now on a mission to reform the American healthcare system. Through his companies, Cost Plus Drugs and Cost Plus Wellness, Cuban is trying to make healthcare more affordable by cutting out middlemen and making pricing more transparent. But he argues that fixing America's healthcare system will require breaking up massive conglomerates that wield enormous power over pricing and competition, often at the expense of patients. Nick Gillespie talks with Cuban about why he supports bipartisan legislation from Elizabeth Warren and Josh Hawley to break up Big Medicine. Cuban explains how artificial intelligence can expose hidden costs in health insurance contracts and transform the way doctors diagnose and treat patients. They also discuss Cuban's support for Texas Democrat James Talarico and his belief that political parties have outlived their usefulness. The billionaire entrepreneur makes the case for restricting social media algorithms for children under 16 and discusses why he isn't particularly worried about socialism's growing popularity among young people. Finally, Cuban reflects on how Ayn Rand's The Fountainhead shaped his understanding of capitalism and why he believes helping others is part of being a successful entrepreneur. 0:00—James Talarico and the Break Up Big Medicine Act 4:13—Healthcare conglomerates and "contractual terrorism" 15:39—Drug pricing and pharmacy benefit managers 26:58—How AI will transform healthcare 33:04—The Trump administration's policy reforms 34:22—How does Cost Plus Drugs work? 43:08—The backlash against billionaires 47:52—Political parties and Texas governance 51:50—The rise of support for socialism among Gen Z 55:11—Would Cuban back a social media ban for minors? 55:50—The influence of Ayn Rand Producer: Paul Alexander Audio Engineer: Ian Keyser Transcript This is an AI-generated transcript. Check all quotes against the audio for accuracy. Nick Gillespie: This is The Reason Interview With Nick Gillespie. Thanks for listening, watching, however you're consuming this. My guest today is Mark Cuban, the former majority owner of the Mavericks, now a minority owner, if memory serves. And that's partly because you're going all in on Cost Plus Drugs, a company and a business model about prescription drugs and, more broadly, wellness and health care. We're going to talk about that in a little bit, but right now, you have recently in a very tight Texas Senate race, you've endorsed James Talarico, or you're speaking with him, partly because he has talked about coming up with a health care plan that you think will reduce health care costs. Can you talk a little about the Talarico plan and why that was so important for you in terms of signing on to appear with him? Mark Cuban: I mean, really, what we agreed on is that we need to pass Elizabeth Warren's and Josh Hawley's Break Up Big Medicine Bill. And that was the fundamental reason why I supported him. I mean, there are other reasons as well, but I think that as long as we have these huge conglomerates that dominate the economics and provision of health care, the system's not ever gonna work, and we're gonna get what we have right now. So, identify what is the main problem with health care right now? Is it just that everything costs too much, and that's because of the big conglomerates? Or is it that the quality of care is no good, the rate of innovation is dying? What's the main problem with health care? It's the economic side. I mean, the U.S. has the best health care in the world. It's not even close. The problem is, it's not accessible to everybody, but it's not affordable to most. And that is underpinned by how the biggest conglomerates in the country, that do hundreds of billions of dollars each in revenue each year, dominate the economics of health care. So how is the Break Up Big Medicine Act or bill how is that gonna actually reduce costs? Because I know in the past you've talked about being a small-l libertarian. You're obviously very much in favor of capitalism. You don't hate billionaires. You don't like wealth taxes. You like free markets. How is the Break Up Big Medicine Act gonna work? Because one of the reasons we're where we are now is because of all of the past government intrusions into the market or structuring of the market. I mean— No, that's wrong…OK, let's just… I mean, the government already spends about 50 cents of every dollar in the healthcare ecosystem. So it's not like this is a market, right? Well, it's not a market. You're correct though. Right? But in order to have an efficient market, you have to have price discovery. In order to have price discovery, you can't have gag clauses in every single contract that every single health care—you can't have gag clauses in every single health care benefits contract that's signed. Period. End of story. And who commands those gag clauses? The big companies that need to be broken up. And it's not an issue of what the government is doing. It's specifically an issue of the choices that are being made by the CEOs and C-suites of those companies. You look at the largest vertically integrated health care companies: 3,000-plus subsidiaries, $150 billion in intercompany transfers. That's more than the GDP of 13 states. And so they literally dominate the economics. And that's just one company. If you go to the top three, the point of this is, the leverage is not with the federal government in this particular case. The definitions, the relationships, the pricing, the rules are being set by these big conglomerates. And if you were to break them up, it would change. Ok, so we can work through a more specific example. What's the worst conglomerate, then, or the biggest healthcare—vertically integrated provider? And how are they bilking everybody—customers, doctors, hospitals, unless they own the hospital system? Who's the worst, and how is that working? UnitedHealthcare. They're the ones that have thousands of subsidiaries, $150 billion, $160 billion in intercompany transfers. They either contract or employ more than 10 percent of the doctors in this country. Out of those 3,000 subsidiaries, they own pharmacy benefit managers, they own health care providers, they own what they call ASOs, third-party administrators that administrate care. They own Medicare, Medicaid, MCOs that manage Medicaid for states. There's just—I can't even begin to start to list all the different things that they control. So one of the ideas behind a vertically integrated company is that they— if you are sourcing your own cost inputs, you can do things more efficiently, and you pass that on to the customers. So McDonald's grows its own potatoes because— Sure, I know I get it. I know the potential benefit. Yeah. Oh, no, no. I know that. So explain— It's also a choice. So, here's the choice. You can pass it on and say, "Look, we're going to be more efficient and pass on the benefit of our efficiency." And the easy way to understand whether that's occurring—there are two easy ways. One, to ask anybody who uses their services or any of their peers, and just ask them: Have you felt like you've been the beneficiary of their scale? Based on the polls going around for these midterms, right, the number one issue is affordability, and the number one underpinning of that affordability is the cost of health care. Number two, being a healthcare geek, I will read the transcripts of their quarterly earnings conference calls. The one thing I have yet to ever hear them say over the past four or five years is that, "Based on this investment, based on this new technology, based on this acquisition, we are going to be able to reduce the cost of care or services to patients that receive that care." Not one. So patients just don't show up in the way you're talking about it? It's like… Not at all. We've streamlined like our costs— Right. Well, not even necessarily streamline our costs, but what does show up is: "We are going to be able to increase our earnings along with our previous trend. We are going to be able to increase our margins and our revenue for specialty medications," right? There's just a long list of things that they are pushing. And the bottom line of this—and every capitalist, every CEO has to decide who they're responsible to. Typically, in a public company, which all of these are, they're responsible to shareholders. And that's not necessarily a bad thing if they're aligned also with their customers, their ultimate customers. It may not be the direct customer, but the ultimate customer, which is a patient. They are not aligned. Not only are they not aligned with the patients, they're not aligned with any other stakeholders. When you talk to corporations, big or small, a solo entrepreneur, 100 employees, 100,000 employees, and you say, "How are your health care costs doing these days? Are they going down? Are they going up?" And obviously, the response is they're going up. And you talk to their members, their employees, their families: Are your deductibles and premiums going up or down? And so the proof is in the pudding that they're aligned with their shareholders, but they are not aligned with their ultimate customers. And that creates a disconnect. And those are the decisions that they've made. In one case, with a tragic outcome, unfortunately. And so going back to the Break Up Big Medicine Bill and the outcome, when you have somebody who is that big and has that much control and that much regulatory capture, it's AT&T time. It's Standard Oil time, again. Yeah, I mean, but then it gets complicated. And I don't want to spend too much time on this, but in the sense that when Standard Oil got broken up, they were actually charging the least for their products in their history. This should be easier then, right? Because now these guys are charging the most. No, no. Well, I'm saying it gets complicated because you mentioned regulatory capture, and this is part of the problem. Like, if UHC, if UnitedHealthcare is so bad, why do companies keep using them as a benefit? I'm so glad you asked that. Why do they keep on buying from them, right? Why do they keep on doing business with them? Right? Right. So I spend most of my days going to CEOs and explaining to them how they're getting ripped off and how they are getting worse outcomes by dealing with these big conglomerates. Almost all my days. And what I can tell you— I'm sorry to interrupt, just real quick, because just to get you on the record on this. You're not against bigness per se… No! Right? Big conglomerates—because people like Elizabeth Warren often are like, if it's a big company, break it up, right? Not the issue to me at all. If I were running that company, I'd be like, "We are so efficient. We are so good at what we do. We use AI and technology better than anybody, so good that we're pushing prices down." And because of that, we'll make more money. And you know what? Even if we don't make more money, we'll make enough to keep our shareholders happy. But you know what? I'd rather be a great citizen of this amazing country of ours, and if that means better health care at less cost, and our P/E ratio needs to be a little higher to get that stock price where we want it, I'm good with that. That's how I would—so I have no problem with scale. The problem I have, like when you talk to people who work for these companies, when they say, "Yeah, I work for whoever," the first thing they say to me is, "I'm sorry. I need the job." It's not like they're proud. It's not like, "Hey, we're doing such amazing things." And so that's the underpinning of all of this. So go back to your point on why do companies hire them, right? I spend so much of my time—literally before this call, I dealt with a group of people who were HR representatives and buyers of these services. And I said, "Do you like these companies that you're dealing with?" They refer to the big insurance companies as the BUCAs, right? Blue Cross Blue Shield, United, Cigna, etc. And they're like, "No, we don't like dealing with them." I'm like, "Why do you?" "Well, because our CEO just doesn't understand health care costs and health care benefits. And they may know somebody or do business with them." Like, I've literally talked to humongous banks who have said that we're not going to switch because we'll lose their deposits and banking relationships. Ok, that happens. So let's put them out. So now I was talking to this group today, and I started giving examples of places where those big companies were taking advantage of them. And I went directly to contracts because most of the contracts are comparable. So I call them contractual terrorism. The city of Dallas, we'll use them as an example. Their pharmacy benefit manager contract: 1,300 pages. There's no human or humans or enough coffee on the planet. I don't even know if the AIs are capable of scanning that. Well, the AIs are capable of doing it, right? You kind of got ahead of me there, because before they were able to push things through. So, like, for pharmacy benefits, there are these things called rebates, where the manufacturers give money back to the pharmacy benefit managers, and they have the choice of how to distribute it from there depending on the contracts, right? And one of the biggest sources of rebates is something called specialty drugs. They're supposed to be more complicated drugs. Just as often, they're not, but they call them specialty. But in these contracts, and I literally asked the question of this group who has a good understanding of their contract, I said, "How many of you have a clause in your contract that says specialty rebates, specialty medications either get a flat rebate or no rebate?" They all raised their hands. And then I said, "In that contract, doesn't it also say that that PBM owned by that big BUCA—" That's the pharmacy benefit— Benefit manager, right, gets to determine what is a specialty drug or not. So in some cases, it could be generic, it could be a little pill, and they call it a specialty drug so that they get to arbitrage the rebate or to retain the rebates instead of sharing them. So going back to the question of why would a company do this, and it's even worse on the medical side. That's the pharmacy side. There's no company that, if you work for a company that's self-insured, and God forbid you need to get some major surgery, and so they send you a bill, not even specifically to you, but for the whole company every week or every month, right? And the company just writes the check for the bill, and they may or may not even get examples of the claims so they can reconcile them to what was actually charged or paid to the hospital. So you have these huge companies that have no way of reconciling whether or not what they were charged is what was paid to the hospital or doctor or provider. So I was like, why do you do this? Why are you letting yourselves be taken advantage of? And it's because, "Well, it's just happened, it's changed so rapidly, and the prices have gone up so rapidly. We're still in the contract. We're still doing it." And I'm like, so let me give you the way to resolve this. A…
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