MARK CUBAN GRINS. “I’m the luckiest guy in the world,” he says. It’s mid-March and he is on a degree in entrance of 1000 fanatics at SXSW with tech founder Falon Fatemi of the brand new audio-video leisure platform Fireside speaking about, effectively, on the subject of the entirety: why everybody will have to get a crypto pockets, how the metaverse will alternate media, what TikTookay method for professional sports activities. And, little marvel to any person who is watched him on Shark Tank or run into him on Twitter, Cuban has well-developed ideas on every.
Ever since he offered his startup Broadcast.com to Yahoo for $5.7 billion in 1999 and become an speedy billionaire, Cuban has adopted his interest right into a wild array of fields, from well being care to fintech to media, person merchandise, and, after all, sports activities. Where others may have settled right into a at ease existence as an NBA proprietor/playboy, he become a type of super-entrepreneur, now not simplest making an investment in a diverse portfolio of startups, however getting deeply all for some as effectively, even co-founding a couple of.
Cuban describes his procedure as “ready, fire, aim.” He performs up the entire just-a-lucky-kid-from-Pittsburgh factor. But to any person who works intently with Cuban, he is extra like a made up our minds child from Pittsburgh who nonetheless identifies along with his blue-collar roots. Associates wonder at how arduous he works, how deeply he likes to analyze and perceive difficult methods. “People don’t realize how technical he is,” says Fatemi, whose new app for creators Cuban co-founded together with her, after having invested in her remaining corporate, an A.I. startup known as Node.
But whilst his collaborators respect what Fatemi calls “a bias toward action,” he is rarely firing blindly. “It’s still being really smart about what actions you are taking and what money you are spending and where you are firing,” she says. A chief instance used to be proper onstage with Cuban at SXSW, in orange block letters at the entrance of his blue T-shirt: MARK CUBAN COST PLUS DRUG COMPANY. That’s the title of the startup that represents most likely the largest entrepreneurial swing he has taken since Broadcast.com. Once upon a time, Cuban used to be prescient in spotting that streaming would upend reside leisure, however it is been a few many years since he is had a in a similar fashion transformative take. And it did not occur in a single day. Some 3 years in the past, Cuban were given an e-mail from a 33-year-old radiologist named Alex Oshmyansky, with the topic line “Cold pitch.” It used to be one of the he will get day-to-day. (Cuban is legendary for answering chilly emails; see “How to Get Mark Cuban’s Attention.”) Oshmyansky sought after Cuban to put money into a pharmacy he used to be beginning to custom-make generic medication and skip the layer of centerguy wholesalers and so-called pharmacy receive advantages managers, that are normally answerable for heavy markups.
“Mark saw a huge societal problem with a pretty direct solution: Just make and sell medicines for less,” Oshmyansky remembers these days from his house base in Dallas. Cuban’s intuition used to be to peer if Oshmyansky’s concept may well be larger. He answered to the e-mail and started peppering Oshmyansky with questions. What may just he do if cash have been no object? Rather than custom-make medication for person sufferers, what would it not take to shop for or make numerous medication at scale? What forms of skilled sources could be necessary? What forms of relationships? On what timeline? “Sometimes, he actually directly came up with ideas to do much more, such as building a manufacturing plant in Dallas,” says Oshmyansky.
This all came about again in early 2019–and by way of the next 12 months Cuban had now not simplest invested in Oshmyansky’s concept but in addition signed on as a co-founder of a now a lot more formidable corporate. No longer used to be this–as Oshmyansky had as soon as envisioned–a noble nonprofit. Now it used to be a for-profit undertaking bent on purchasing or production as many various medication as imaginable, distributing them on the widest scale imaginable, and providing the bottom costs imaginable and overall worth transparency. Three years of relationship-building and analysis later, the corporate began promoting drugs early this 12 months.
By the time Cuban sat onstage at SXSW in mid-March, Cost Plus Drug had 110 medication available to buy, direct-to-consumer on its site, for a fragment of costs elsewhere–with ambitions to provide hundreds. The costs are in response to not anything greater than a fifteen p.c markup over the drug’s cost–plus a flat pharmacy exertions price of $3. The financial savings may also be outstanding. Consider imatinib, an oral chemotherapy drug offered beneath the emblem title Gleevec: Thirty 400-milligram drugs charge $120 to $150 at mainstream retail pharmacies, together with Costco and Walmart–and just about $800 at CVS and $2,400 at Walgreens, in keeping with GoodRx. At Cost Plus, an identical quantity of the drug is going for lower than $50. The corporate has identical offers on many extra commonplace medicines, such because the generics for Celebrex, Cipro, Flomax, Lipitor, Tamiflu, Wellbutrin, and Zoloft. “Pretty much the drugs that we have, if we have yours, cost less than your co-pay,” he informed the target market in Austin, to a spherical of applause and hoots.
Cost Plus provides a head-slappingly easy way to an issue that is given politicians and pundits suits for years. It does not but settle for insurance–Cuban has top hopes that it will–and it will now not remedy the issue of runaway well being care prices at their root. But it solves an instantaneous and big a part of the issue for many of us, and in so doing may finally end up muscling the trade towards a extra elementary answer. What may sooner or later be Cuban’s largest monetary good fortune may also make his largest have an effect on at the international.
With his Mavericks steaming towards the playoffs and Cost Plus Drug inflicting a stir, Cuban used to be busier than standard this spring, however he took time to talk about the brand new corporate’s way to unlocking worth–and opportunity–by dismantling an trade’s convoluted charge chain.
“We all know people who have had to ration their prescriptions. That should never, ever happen.”
Let’s get started with the marketplace you might be getting into with Cost Plus Drug. Why are medication in a different way so dear? Can you give us a brutally fair overview?
I’m nonetheless finding out the main points. But what I’ve discovered interesting is that the producers aren’t the unhealthy guys they’re made out to be. And that incorporates probably the most insulin producers.
There are corporations known as pharmacy receive advantages managers which are the gatekeepers to all of the prescriptions paid for by way of insurance coverage corporations. If the drug producers need their medication prescribed, they’ve to play the sport the way in which the drugstore receive advantages managers need it performed. Which method environment artificially top retail costs, paying rebates again to the PBMs, and extra, to stick authorized. As a consequence, the PBMs have probably the most energy within the trade. Not the producers. To make issues worse, the PBMs are already vertically built-in into insurance coverage corporations and the most important pharmacy chains. So they can leverage their financial energy on the expense of sufferers.
Can you provide an explanation for, in a nutshell, how Mark Cuban Cost Plus Drug Company does it in a different way?
Our function is to be the cheap supplier for all medication that we’re in a position to promote. We promote at our charge plus 15 p.c. And we’re these days constructing our personal production plant in Dallas with the function of having our prices decrease and increasing our stock to hundreds of substances.
Why has this now not been performed ahead of?
It’s now not conventional for an organization to start out off by way of announcing, “We are not raising money, and we are not trying to maximize profits”–particularly given the volume of capital required to start out a industry like this and the three-plus years without a earnings it has taken us to increase the desired relationships.
If we needed to maximise earnings as maximum corporations do, we would must paintings with insurance coverage corporations and the most important pharmacy receive advantages managers. Their laws and economics would let us get a ways larger and extra successful, however will require us to promote at upper costs. We selected to not paintings with them and to continue independently.
As a rich individual, you almost certainly do not revel in the similar frustrations with the price of well being care that many Americans do, so I’m curious how this factor hits house for you.
I’ve now not had fresh revel in. But I’ve needed to move up hospital treatment prior to now as a result of I did not have insurance coverage and could not have the funds for the desired care. I’ve needed to pass to dental clinics that have been used to coach scholars to get root canals. And should you see my fingers, my pinkies face the flawed instructions as a result of I could not have the funds for scientific deal with rugby and basketball accidents.
But this is not pushed by way of non-public stories. We all know individuals who have needed to ration their prescriptions or make a choice from meals or refuge and their medication. That will have to by no means, ever occur. We hope to switch it.
Is there some way this style adjustments the broader pharma market–nongenerics, as an example?
We’ll develop from our present stock to hundreds of generic and branded medication. Will it purpose others to switch how they do industry? I feel so.
When will the Dallas production facility you might be constructing get started working?
We hope to be open ahead of 12 months’s finish. And we will be able to make as many medication as we will. The excellent information is that we have got room to extend if want be.
Will Cost Plus in the end be capable of paintings with insurance coverage?
Yes, we are hoping to. We have created a PBM that might be rebate-free and cheap. That lets in us to paintings with insurance coverage corporations in the event that they wish to paintings with us. This additionally lets in us to paintings with self-insuring corporations and different organizations, like unions.
What are the largest hindrances that experience arisen because you began in this trail?
The time it takes to construct consider that we’re actual, well-financed, and can do what we are saying we will be able to do. We had been doing this for approximately 4 years, however did not release till January 19 of this 12 months.
What are the regulatory hurdles and your technique for clearing them?
There are licensing and regulatory necessities we need to apply. We apply the similar laws that everybody does. This isn’t a startup that is making an attempt to keep away from rules or licensing necessities. Just the other. We be sure we dot each i and pass each t.
After Oshmyansky emailed you, what did you need to understand in regards to the concept, and him, ahead of you were given concerned?
I sought after to understand if shall we disrupt the trade and be the cheap supplier at scale. As he went throughout the necessities and the prices and the timeline, I were given extra . Part of the method used to be co-founding Cost Plus Drug. With my investment and steering, it allowed Alex to move out and make the offers and commitments that constructed consider. Plus, Alex is amazingly good and detail-oriented. He has the precise proper ability set and background to paintings in this. He is the precise proper spouse for this corporate.
From an entrepreneurial standpoint, the tale of Cost Plus is inspiring, as a result of it is tackling a apparently intractable drawback. Talk in regards to the means of seeing entrepreneurial answers to these forms of issues.
Most instances, those efforts do not paintings. You push up in opposition to the incumbents and one day you recognize both you’ve got hit an insurmountable roadblock or you’ve got so as to carry masses of thousands and thousands, or billions, of dollars–and that kills the corporate. The good looks is we had the capital and endurance and willingness to start out small and push for have an effect on greater than earnings. Most companies should not have that luxurious.
Are there different apparently intractable issues that you simply suppose are ripe for that roughly patient-capital way?
I feel this way can lengthen into hospitals. Besides there being waste, the commercial targets aren’t in sync with the targets of holding sufferers wholesome. There is 0 transparency on prices or even pricing. The misalignment of hospitals and insurance coverage corporations to optimize for earnings moderately than well being is ripe for disruption. [A hospital company] will be unable to scale as briefly as Cost Plus Drug has, on account of the brick-and-mortar necessities. But it’s time for it to occur.
How a lot of your time and effort goes to Cost Plus these days?
Quite just a little. But the easier information is Alex and [trusted Cuban deputy] Ryan Kline have put in combination an important group. They do all of the daily paintings. I paintings on technique and monetary components.
Cost Plus turns out like a type of legacy venture for you. How a lot are you keen to position into it?
From the May/June 2022 factor of Inc. Magazine