Mark Cuban Talks New Price-Slashing Pharma Company and NFTs

HARI SREENIVASAN: Christiane, thanks. Mark Cuban, thanks for joining us. So, let’s get this straight. You have your name on one of your new ventures. It is called the Mark Cuban Cost Plus drug company. What’s interesting is is that that is one of the things that’s almost universal. We’re talking bipartisan, the frustration level that people have with their ability to afford drugs that their doctor prescribes them. I mean the statistics are kind of overwhelming when you think about it. The president was recently referencing how many people in the United States have trouble filling a prescription. So when you started to look at this industry, what were the kind of easy opportunities that you saw for disruption?

MARK CUBAN, CO-FOUNDER, MARK CUBAN COST PLUS DRUG COMPANY: Well, it’s funny, it started with Martin Shkreli ‘cause the thought process was if he can jack up the price, why can’t you just cut the price significantly as well? There must be a lot of inefficiencies in the process to allow that to happen one way or the other. And so that’s what got us going with it. And then the more you dig into how drugs are priced, how they’re sold, the supply chain that is developed to enable the, the purchase and sale of them – it’s just, it’s convoluted in a way that made it ripe for disruption.

SREENIVASAN: You know, a lot of folks have a tendency to assume that this is only in the hands of the pharmaceutical company. What are all the different middle men, so to speak and what kinds of profits are they taking?

CUBAN: So the best way is to analogize it. Imagine there’s a hot restaurant in your city and the restaurant hired a high end door person to be the arbiter who gets in and who doesn’t get in. That’s analogous to insurance companies and provider hospitals and others hiring these things called pharmacy benefit managers to determine what drugs are going to be sold or not sold. They’re they’re the, are they’re the keeper of what’s called the formulary. Now in addition, they also try to negotiate – so because they’re given that right to manage what goes into the insurance or provider business, they then also go to all the different manufacturers of the drugs and they say, look, if you want to have your drugs sold by this hospital or this insurance company and be on the formulary list, you need to sell it to me at your best price. And oh, by the way, I also want you to kick me back a rebate so that I can make my, you know, make my, my bottom line look better. And so what we said was that’s all noise that just really makes it inefficient. We’ll create our own pharmacy benefit manager. We’ll negotiate with hospitals, we’ll negotiate with insurance companies. We’ll negotiate with unions. We’ll negotiate with pick any type school, any type of organization companies that self-insure. And we will go out there and buy those drugs, just like any PBM does, but we’re not gonna have, we’re not gonna ask for any rebates. And so it’s in the best interests of the manufacturer, the pharma companies to work with us because their products now get delivered to consumers at the best possible price. And so what we’ve done effectively is say, you know, we’re not gonna let that doorman. We’re not gonna let that pharmacy benefit manager, get away with getting rebates. We’re gonna avoid that. And we’re gonna pass all those savings onto patients at a cost plus 15%.

SREENIVASAN: So there was a stat, I think last year that came out that 80% of this pharmacy benefit manager market is controlled basically by three different companies. I mean, I know you own the Dallas Mavericks and you’re used to competition, but these are incredibly powerful players here. I mean, are you concerned that they’re going to have well lobbying muscle to keep the status quo, because this is pretty profitable for them.

CUBAN: Yeah. I’d be lying if I, if I didn’t say yes. Yes, it is a concern. They do have a lot of power. They do have a lot of lobbying muscle. Our hope is we’ll get enough traction with consumers and that’s one of the reasons I put my name on it, so it can’t just be just some vague company that people really don’t connect to. By putting my name on it, somebody’s responsible for it, and that’s me. And so when any, if any of the big pharma, big pharma, if any of the big companies, the wholesalers and others that you mention decide to take action, they’ll know, and I’ll be very clear and vocal about what’s going on publicly, and I have a big platform to do so. 

SREENIVASAN: You know, I am loathe to call you the underdog here. You’re a billionaire. But we’re still talking about three major companies and really a system that’s been in place for so long that there’s often a resistance to change from the way that people behave, whether it’s, you know, the first switch that people might have had to decide to buy medicine over the internet or have it delivered to their home instead of picking it up at the pharmacist. So how do you get over that hurdle?

CUBAN: Price. By being the low cost provider. There are people, as we all know, who are making decisions to, you know, decide between food or medications or, you know, not to be, to be able to ration their medications. And if it comes down to it, if you’re able to get medication from cost plus drugs.com at a price you literally can afford cheaper than your copay, even if you do have insurance, then people are gonna find their way to us, and they have.

SREENIVASAN: One of the reasons that you’re taking this on is partly because you have a platform. There have been lots of people with platforms. Why hasn’t this been tried before? Or if it has, why hasn’t it succeeded?

CUBAN: Well, it takes a lot of leg work and I have to give a ton of credit to my partner, Dr. Ashmaski. And it’s not so much that others couldn’t do the same thing. But typically what happens is when a venture like this is created, they’re investors. And those investors wanna maximize their return. That’s not what I’m in this for. Right. I’m the luckiest guy in the world financially. I’m set for generations, right? This was a chance to have an impact. If you’re trying to optimize earnings for investors and returns for investors, you’re not gonna be able to do this. If you’re doing this because you’re trying to offer the lowest cost and you wanna make a little bit of money, so you can continue to reinvest. That is why we’re able to do this and others have not.

SREENIVASAN:  Are you concerned about, say for example, Walmart or Amazon. Why don’t they become, you know, pharmacy benefit managers, they already have an existing infrastructure.

CUBAN: Yeah, of course. And, actually they’re already in the business. They both have pharmacies and they both compete at some level. And look, if they just squash us and the, but to do so, they have to beat our pricing. That’s not a bad thing. That’s not a bad thing at all, because at the end of the day, I’ll be there waiting if they ever drop the ball to do this again. And if someone comes along and now it’s cost plus 3%, who’s gonna be mad at that?

SREENIVASAN: Why does it take a billionaire to do this? I mean, why—Did the system not work? Are there forces sustaining the status quo?

CUBAN: Of course.

SREENIVASAN: Why can’t we change this ourselves?

CUBAN: Politicians want to get elected and we play to the extremes. No one says, okay, let’s just look in the middle. You know, let’s just try to take this one step at a time. Politicians walk in, talk about how they’re gonna change this Navy of battle ships that can’t be turned quickly, if at all. You’ve gotta start picking off at the edges and step by step, get it done. You know, um, it’s not even a discussion of Medicare for all versus the current system or comparing it to other systems. It’s what circumstances do we find ourselves in? Where can we make changes? What are the steps that we can take and how can we execute on that efficiently? We don’t look at it that way. Everybody makes big proclamations to, you know, touch it or don’t touch it. Medicare for all and not Medicare for all. There really needs to be transparencies and steps in the middle that can start to create change. And you have to look at this, not on a four year horizon, but a 20 or 25 year horizon.

SREENIVASAN: And I wonder if one of the problems here is that we have said that medicine should be a for-profit product, and that we’re subsidizing some of the failures in the labs and some of the experiments, and some of the risks with drugs that are less expensive to produce are more necessary for more people. And, you know, at the same time, you’re talking about kind of a compassionate capitalism that can exist. That’s not necessarily what shareholders would wanna say for, uh, everywhere else. I mean, you can do this because that’s not your primary goal, but most of the market doesn’t respond that way.

CUBAN: Well, there’s not one singular answer there. You’ve gotta really break it down. There are drugs that are created by the NIH, right? The national Institute of health. We’re not very smart of how we do our licensing of those drugs that are created via taxpayer funds. You know, I saw something. It’s, it’s been a few years now where 113 out of 116 single molecule drugs, um, that were the most popular whenever it was–five years ago–were created at the NIH. Yet we’re not as taxpayers continuing to earn royalties from those drugs. We need to recognize that if taxpayer money creates something, it needs to either pay us revenue back or, better yet, be sold at a low-cost price. And that’s part of the licensing requirement. Now for drugs, you know, a lot of the advanced cancer therapies, there is a lot of risk. There is a high failure rate and for better or worse, we are going to subsidize their losses, um, via their wins, right, via their successes. And that’s just the nature of the beast. Look, we’re not the only system in the world. You know, if you go to other countries, there are some countries who are creating drugs and have done a good job, but there’s nobody who stands out in terms of, um, innovation that we should copy or who does a better job. You know, a lot of drugs are created here because the funding is available for them to take chances. And so I think we’ve gotta look at, you know, bifurcating where the NIH is involved and where they’re not involved.

SREENIVASAN: Why isn’t this costplusdrugs.org. Why not be a not for profit and just run this at the margin. And that’ll be good enough?

CUBAN: Because I want it to be able to find drugs that–biosimilars, as an example– that, you know, you may not be able to just buy a pill from somebody else because it’s manufactured as a generic. You may have to go and do it yourself. And so, you know, and we want to be able to build like the factory that we’re building in Dallas to be able to manufacture it on our own and push our pricing down even lower. You know, trying to create a level of self-reliance is going to take that 15% mark-up so that we can manufacture and push the pricing down and extend into other drugs.

SREENIVASAN: While I’ve got you here, your Twitter handle points to your own NFT. And I think there’s a lot of people in the audience that have no idea what those, not just three letters stand for, but what this entire sort of web 3.0 hype is about.

CUBAN: Sure.

SREENIVASAN: Right now, if you can just kind of help explain. If I, Joe Consumer, go and I buy a Mark Cuban NFT, I understand trading cards and, and collections and so forth, but what is the utility of a purchase like this, a technology like this, and why are you in this?

CUBAN: So a couple things there. One, if you understand trading cards, NFTs are just a digital collectible. That’s it. Okay. You know, we used to have record collections. Then we had CD collections. Then we had, um, MP3 collections. And MP3’s digital. You can listen to it, right. An NFT is just a digital file that has its providence, its ownership information and transaction history stored on a blockchain so that we can prove what it is and who created it. And also it allows and the most interesting part for me and what got me excited about it is if you’re a creator of content and all content is digital now because you can track the Providence of it. And because you’re able to use something called smart contracts, you’re allowed to attach a royalty to that digital file to that NFT that stays with it pretty much forever.So if I’m an artist and I create my Mark Cuban NFT, and I wanna sell it for a hundred dollars with a 15% royalty, then you come along Hari and buy it for $200. Well 15% of that $200 or $30 goes back to me, the creator and that stays in perpetuity every time it’s bought and resold. That’s a unique feature. I think about it as an entrepreneur and start applying it to other applications. So look at the cost of textbooks. Imagine if college textbooks were bought and sold as an NFT, rather than as a student having to go to the used book store and make a decision on buying a used book. And then when the semester’s over trying to figure out where to sell it all the while for those transactions, the publisher and the author get none of it, right? Imagine if those were NFTs and there was security, so you couldn’t just make copies of it. And a reader was built into the NFT, et cetera. Well, you could sell it for a, the publisher and the author could for a whole lot less because after each and every semester, when that NFT was resold, the publisher and author could take 10, 15, 20, 25% of every resell. That’s an application that could lead to pushing the price of college textbooks down significantly. And you can start applying those to so many other applications as well.

SREENIVASAN: So, uh, you know, do you think that we will get to a point where cryptocurrency is just part of how we live? I mean, because still right now, you know, people might be familiar with the word Bitcoin and the idea, and they hear about volatility of the price. They don’t necessarily go to their pizza shop and pay for it. It’s not an easy thing to do. And then if they wanna buy your NFT, they still have to figure out how to have a digital wallet, how to pay in some sort of a coin that isn’t a U.S. dollar. They can’t just swipe their credit card or put a credit card number in. So there are still these kind of hurdles there. So how long until this becomes easier for a larger percentage of the population to engage with.

CUBAN:

This is very analogous to the early days of the internet. When we started AudioNet as the first streaming company, back in early 1995, in order to just be able to listen to audio on the internet, you had to have a 56 K modem had to have a TCP I P client. You had to download the software from your ISP. Then you had to find the website. Then you had to do to click on a, a, um, a file that then launched another player that played the audio. And now when we think of streaming with Netflix, it’s all just there. And we just click on whatever we wanna watch. The same thing will happen with crypto. The challenge just like back then, it was hard to separate the price of internet stocks from the applications, the signal versus the noise with crypto. It’s really hard to tell one from the other, all the speculation right now is just noise. In terms of the underlying applications — book application. I mentioned the digital collectible applications. Those are all built on something called smart contracts, and those applications are gonna get better and better and better. The technology is going to mature. So there’ll be a point. It might take five years. It might take 10 years where we look back and say, remember, when you had to have another wallet and you had to go find all this different, the right crypto to match the right app. It’ll definitely simplify over time.

SREENIVASAN: All right, mark Cuban. Thanks for the advice on the, uh, web 3.0 and good luck with your, uh, new company. Thanks so much for joining us.

CUBAN: Thanks, Hari. I really appreciate it.