[00:00:00] Stacey: Episode 418, Mark Cuban with some advice for CEOs and CFOs of self-insured employers. Today, I am speaking with Mark and Ferrin Williams from Scripta.
[00:00:22] American Healthcare Entrepreneurs and Executives You Want to Know. Talking. Relentlessly Seeking Value.
[00:00:30] Stacey: CEOs and CFOs … hey, this show is for you. Let’s start here:
What do all of these numbers have in common: $140,000, $3 million, $35 million, and $3 billion?
These are all actual examples of how much employers, unions, and some public entities saved on healthcare benefits for themselves and their employees. The roadmap to saving 25% on pharmacy spend and/or 15% on total cost of care in ways that improve employee health and satisfaction always begin when one thing happens. There is one vital first step.
That first step is CEOs and/or CFOs or their equivalent roll up their sleeves and get involved in healthcare benefits. Why can’t much happen without you, CEOs and CFOs?
Here’s the IRL: In 2023, the healthcare industry has been financialized. There is a whole financial layer in between your company and its healthcare benefits.
And unless the C-suite is involved here in bringing their financial acumen and organizational willpower to the equation, your company and your employees are currently paying hundreds of thousands, maybe millions, of dollars too much and doing so within a business model that deeply exacerbates inequities. There are people out there who are very strategically taking wild advantage of a situation. Or CEOs/CFOs fear anything to do with healthcare in the title and don’t do their normal level of due diligence. You think it’s an accident that this whole space got so “complicated”? HR needs your help.
Bottom line, if you are a CEO or a CFO and you do not know everything that Mark Cuban and Ferrin Williams talk about on the pod today … wow, are you getting shellacked. Mark Cuban uses a different word. Healthcare benefits are, after all, for most companies the second biggest line-item expense after payroll.
But don’t despair here, because all of this information is really and truly actionable. Others out there are cutting zeros off of their spend and actually doing it in ways that are a total win for employees as well. My guest today, Mark Cuban, is a CEO, after all; and when he looked into it, it took him T-minus ten minutes to figure out just the order of magnitude that his “trusted” benefits consultants and PBM and ASOs and others were extracting from his business. He pushed back. So can you.
But just another reason to dig into that financial layer wrapping around your employee health benefits right now, you might get sued by your employees. Link in the show notes to an ad currently being circulated on LinkedIn by class action attorneys recruiting employee plan members to sue their employers for ERISA violations. It’s the same attorneys, by the way, from those 401(k) class action lawsuits. I’ve talked to a few CEOs and CFOs who are scrambling to get ahead of that. You might want to consider doing so as well.
Now, for my HR professional listeners, considering that some of what Mark Cuban says in the pod that follows is indeed a little spicy, let me just recognize that the struggle is real.
There are multiple competing priorities out there in the real world, for sure. And bottom line, because of those multiple competing priorities out there in the real world, it’s really vital that everybody work together up and down the organization in alignment. Lauren Vela talks a lot about these realities here in episode 406.
This is a longer show than normal, but it’s also like a show and a half. Mark Cuban talks not only about his work with Mark Cuban Cost Plus Drugs, which is a company that buys drugs direct from manufacturers and sells them for cost plus 15%, a dispensing fee, and shipping. It’s kind of crazy how so often that price is cheaper, sometimes considerably cheaper, than the price that plan members would have paid using their insurance and the price that the plan is currently paying the PBM.
Most Relentless Health Value Tribe members (ie, regular listeners of this show) will already know that. But what is also fascinating that Mark talks about is what he is doing with his own businesses and the Mavericks on other fronts, like dealing with hospital prices. In this show, we also talk the language of indie pharmacies, fee-only benefits consultants, TPAs, PBMs, and providers doing direct contracting. There are, in fact, entities out there trying to do the right thing, and Mark acknowledges that.
Ferrin Williams, PharmD, MBA, who is also my guest today, is chief pharmacy officer at Scripta and an expert in pharmacy benefits. She adds some great points and some context to this conversation. Scripta is partnering with Mark Cuban Cost Plus Drugs. Scripta has a neat MedMapper tool and also services to help employees find the lowest costs for their prescriptions. If you are a self-insured employer, for sure, check out Scripta.
Also links in the show notes to other shows that you should listen to now. If you are inspired to take action, I would recommend the shows with Paul Holmes, Dan Mendelson, Andreas Mang, Rob Andrews, Cora Opsahl, Lauren Vela, Peter Hayes, Chris Skisak and Gloria Sachdev, and Mike Thompson. Also, Mark Cuban mentions in the show the beverage distributor L&F Distributors.
My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.
Mark Cuban, welcome to Relentless Health Value.
[00:05:36] Mark: Thanks for having me on.
[00:05:37] Stacey: Ferrin Williams, welcome to Relentless Health Value.
[00:05:39] Ferrin: Thank you, Stacey. Glad to be here.
[00:05:41] Stacey: Mark, you were just talking about what your own journey was when … because obviously you are, in fact, an employer here. So, do you want to just talk about that?
[00:05:49] Mark: Sure. Once we started Cost Plus Drugs and started shipping, the next step, particularly if you’re a tech guy like me, is to eat your own dog food, right?
That’s tech speak for you have to use your own software; you have to use your own product. And so, I started having our folks go through the process of saying, okay, we have ESI etc.
[00:06:09] Stacey: ESI being Express Scripts, one of the big three traditional PBMs.
[00:06:13] Mark: So, let’s see if they’ll let us just add in Cost Plus Drugs to replace the pharmacy benefit manager so we can save some money, because obviously any money we save is my money that we’re saving, since we self-insure. So, I was like, it shouldn’t be that tough.
Obviously, it was tough. They don’t like to carve out. And so basically we told them, “Okay, we’re going to move away from you for at least our pharmacy benefits. And as it turns out, we’re going to do all healthcare away from a traditional environment.” And so, as is typical for most companies, the CEO doesn’t pay attention to those details.
It’s the HR person that you get a consultant. The consultant tells you whatever, what they’re doing with everybody else. And then they, they basically lie to you and say, “Oh, but we’re going to give you a better deal, and it’s going to be great.” And so, for the first time ever, I decided to go through and look.
And the first thing that made me feel like a real idiot was the fact that we were paying a benefits consultant $30 per employee per month. Now that’s just insane. That is just insane considering that we didn’t get anything unique or unusual. So, I said to our folks, “Okay, that’s the first thing to go. That’s gone. We no longer use a benefits consultant.”
Then I started digging in and looking at the rebate. As you start looking to see what they were charging us, the prices were insane compared to Cost Plus Drugs. And now with Cost Plus being transparent, not only do we get to see our own prices, but everybody gets to see, gets to compare their prices to what Cost Plus charges.
Then you start to realize the delta in pricing, particularly for higher-priced generics, is where they make their money.
[00:07:47] Stacey: What you’re saying is that if you take the list price and even if you subtract the rebate, the net price after rebate is still really high in a lot of cases.
[00:07:57] Ferrin: It is really high, Stacey.
In most industries, competition drives pricing. But in our industry, the competition happens as PBMs make their formularies, so they’re negotiating with the manufacturers who sometimes pay 60% to 80% in rebates just to be listed on the formulary. Mark, it sounds like you had a bad experience, but I personally know plenty of great benefits consultants who do have aligned incentives with their clients.
[00:08:24] Mark: When you think it through, you start to realize that money is being spent primarily by your sickest employees. We have a relatively young company with Mark Cuban Companies, but the Mavericks have some older employees. With their deductible—and we have a great insurance program, I mean, people never leave because they don’t want to leave our insurance; it’s amazing—you look at the numbers, and you start to realize that our sickest employees were the ones that were subsidizing the rebates because they were the ones that had to spend up to their deductibles. They were the ones that take more medication, so they had co-pays. Now the co-pays weren’t big, and deductibles weren’t high. But they were still there.
When, as a CEO, when I finally realized that my sickest employees were subsidizing this check I was getting, it made me sick to my stomach. And in terms of how do you get self-insured employers and the CEOs and the CFOs and the head of HR to recognize that, that’s exactly what I’ve started to do. And that’s why I’m here to tell CEOs of self-insured companies and CFOs and HR people that money that’s coming back in a form of a rebate is paid for by your sickest employees.
How does that make you feel? How awful is it going to be when your sickest employees start to realize that they’re subsidizing those millions of dollars that your CFO loves on the balance sheet? And Mark Cuban is out there talking about how sick that is and how horrific that is that HR, CFOs, and CEOs take pride in getting huge rebates without realizing that it’s their oldest and sickest employees that are paying for that. That’s just wrong. And that’s what I’m going to use my platform to convey. And that’s what I’ve been doing. I’ve been talking to CEOs of bigger companies. And you’re starting to see some of them say, “Okay, this is wrong. We’re going to change.”
[00:10:13] Stacey: Nothing like exacerbating disparities of care also. So, you hit on a number of, I think, really important and under-known or -appreciated points in what you’re talking about there. First of all, there’s Lauren Vela, who is a PBM consultant. She says one of the tests that she gives a PBM when she’s working with an employer is, will they add Cost Plus Drugs to the benefit design? Because she said that if they don’t, if they refuse to, she’s like, that’s your first red flag.
[00:10:40] Mark: Because it means they’re making money on the spread on generic pricing. I did a quick... When we first started shipping to Cost Plus back in January of 2022, and we only had 138 meds, I went and took those 138 meds, but only the ones that cost more than $30.
I didn’t go into the, the things that were really cheap. And just for 18 months, the Mavericks got charged $160,000. And if we would have gotten them through Cost Plus Drugs, they would have been $19,000. It’s just insane. And they were telling us, “Oh, you’re getting a great discount from average wholesale price.” You’re getting 83% or whatever it was. But it’s just a manufacturer price, and they keep the delta. That’s where they make their money. It’s just insane.
[00:11:21] Stacey: Well, it’s also really relevant what Kentucky did, the state of Kentucky. They had an initiative. They were talking about firing their PBM. Wow, did the PBM lobby go completely crazy.
There was fearmongering. They were saying that Kentucky’s prices were going to go through the roof. All the things. Turns out they saved $283 million.
[00:11:41] Mark: And who did they use as their PBM?
[00:11:43] Stacey: Who did they use as their PBM?
[00:11:44] Mark: I forget the name, but they aren’t even transparent. It was just the traditional PBM that worked in the traditional ways that took advantage of the fact that the big three overpriced them so dramatically and so egregiously.
If I read correctly, that PBM that they switched to isn’t really doing them a whole lot of justice even, even though they saved all that money.
[00:12:03] Stacey: Yeah, it just goes to show you that there’s been, again, a number of studies which have showed that literally a third of healthcare spending in this country is waste.
[00:12:11] Mark: I sat in front of a huge, huge, huge company. I said to them, “What’s the role of insurance? What is insurance designed to do?” And they gave the standard answer: It’s designed so that they aggregate capital, so that when you don’t have enough capital, they are there to help support your expenses, whatever they may be, for whatever type of insurance you’re buying.
I’m like, the size of your company, as a self-insured company, do you ever need insurance? Why are you using insurance at all? They don’t need the capital support of the insurance companies. And I think that is the next fundamental question because even self-insured companies, even though we say self-insured, they still use insurance; and they use the insurance companies and there’s all kinds of fees and all kinds of administrative aspects to it.
And even … there’s still claim denials. It’s your money, and they’re denying claims so that they can retain more administrative expenses and charge you more for the things they’re doing to deny claims. It’s insane. It is completely insane.
[00:13:12] Stacey: Yeah, I think that many self-insured employers forget that prior auth services are actually a profit center.
But just kind of going back to the rebates, because I do believe that there’s sort of this, I have had some, probably the same kind of weird conversations that you’ve had and, cast no shade here, because this whole healthcare thing has been shrouded in shadows for so long, if you can’t convince them, confuse them, that kind of methodology.
[00:13:40] Mark: No, it’s that’s, that’s the entire industry. If you can’t convince them, confuse them and hide it. That’s been one of the big bonuses of Cost Plus, because historically in my career, if I see somebody that wants to do a contract and instead of wanting us to brag about what’s in the contract, they hide everything that’s in the contract and say, “You can’t talk about it,” that’s a huge red flag, huge red flag. And that’s a standard in the industry. Cost Plus Drugs comes along and you can see what you should be paying for all these different medications, and people are just stunned at how they’re being overcharged.
[00:14:14] Stacey: You have said this a lot. You’ve said that, the way to make a lot of money in the drug supply chain is to be an insider and, and really to do exactly what you just said to hide dollars and it’s, it is strange to me, or maybe strange is not the right word.
[00:14:30] Mark: Strange is a good word. Yeah, it doesn’t, it doesn’t seem to make sense. Doesn’t, it doesn’t make financial sense.
[00:14:36] Ferrin: I’ve talked to plenty of HR professionals, and they’re great people and they care a lot about their employees. But who doesn’t like receiving millions of dollars back in rebate checks? I equate it to the same psychology as getting a tax refund every year. It’s your money, but it still feels good to get that refund, and they’re so used to having it now.
[00:14:56] Mark: Yeah, I mean, that’s a great analogy because we all had that experience where we know it’s our money, but we still can’t wait to get that check because it’s the savings. It’s the savings account we were never able to save for.
[00:15:08] Stacey: Well, just interjecting, I mean, I think one of the big things that many self-insured employers really don’t understand is, even if they have a contract in which they are getting “100% of the rebates,” it’s like the inconceivable. I don’t think that word means what you think it means. It’s like rebates can be defined any way the PBM wants them to be defined.
So like, I can just call it something else. And then they employ ...
[00:15:31] Mark: They’re playing left pocket, right pocket all the time because rebates essentially are going away because of all the legislative risk. And now they’re doing co-pay accumulators. There’s just so many games that they’re playing. Administrative fees, data fees will charge you back for your own data.
It’s insane. And they’re still making that money because you haven’t seen any of the big three, all the public companies making any announcements that their earnings are going to drop dramatically or drop at all. That’s just not happening and that tells you all you need to know.
[00:15:59] Ferrin: And it’s interesting that they have these huge GPOs to collect a lot of the rebate money and that they’re moving them overseas.
[00:16:08] Mark: So they’re out of the purview of legislation.
[00:16:10] Stacey: Exactly. And I just want to make it clear that who we’re talking about here are the big old guard PBMs. There’s a number of smaller ones that have … and I’m not certainly saying that just because a PBM is small or even that a PBM “says they’re transparent.” It’s very much buyer beware here. Without adequate due diligence or looking at the footnotes buried in the contract terms, an employer can really be taken advantage of.
[00:16:34] Ferrin: It’s important to surround yourself with trusted partners who bring that added experience to the table.
[00:16:39] Stacey: This is just one of the reasons why Andreas Mang, for example, from Blackstone, he often, when he first walks in to meet with a CEO or CFO of a company that they’ve just inquired, he sits down in the chair and looks at them and says, “Hey, how’s the healthcare insurance company that you’re running?”
[00:16:54] Mark: Right? Yeah.
[00:16:55] Stacey: And the person looks back at them like we’re a finance company or we make cans or something, right? Like, we’re not a healthcare company. But when you start thinking that healthcare is generally the second biggest line-item expense after payroll. And generally speaking, if all of the purchasing decisions and all of the contracting decisions and just the only people that are even thinking about these benefits are the HR team, none of whom have, if they had a finance degree, they would not be in HR.
[00:17:22] Mark: Well, it’s not even that. They look at it on the, as a single bookkeeping entry, right? They look at it. What’s my cost per employee? Like at the Mavericks, we were paying $29,000 for a family of five annually. And we had great benefits, but still, again, that’s insane. Then if you’re getting a rebate back, you’re just, it’s just a one liner.
And if nobody digs in, then it’s just like, well, the HR person says to the CFO and CEO, “We’re getting this check back, which is nice. But if you just look at, across the industry, healthcare insurance costs are going up 7% a year; and ours only went up 5%.”
Again, it’s all nonsense numbers, but it makes the HR person look good. It makes the CFO and the CEO feel good because they didn’t dig in just like I didn’t. It is so freaking embarrassing that I didn’t dig in despite being in the healthcare industry, and once you do dig in, you just realize how bad it is. Now the next question becomes, how do you get the CEOs, CFOs, and HR of these self-insured companies to dig in?
And the only answer is, I go out and I talk as often as I can, and I embarrass the shit out of them. Because when the media is saying, CEO of a big company, did you know that your sickest employees are paying for that rebate you get? Or that’s your sickest employees, now that there may not be any more rebates, they’re paying for all the extra money in generics that you’re being charged or even brands that you’re being charged because they have the highest deductibles that they have to meet. So, they’re actually paying all the way up to their deductibles. And so, when you get charged $150 or $500 or $1000 for a generic you can get at Cost Plus Drugs or somewhere else for a tenth of that, that money is being paid for by your sickest employees that use that medication.
How does that make you feel? Now, when your employees hear about that, what do you think they’re going to say to you? Because you see that person that’s been coming to work, they’re stressed, they miss days because they’re sick, and you talk to them, your HR person talks to them, and they’re stretching to meet their $3000 deductible, let’s say.
Because if you make $50,000, you’re after-tax, let’s just say, is $35,000. So you’re paying one, you’re paying 15% of your after-tax income because you guys don’t want to negotiate better or you guys don’t want to have transparency. How does that make you feel, Mr. CEO?
[00:19:47] Ferrin: And I love that you are going direct to CEOs and CFOs.
I can tell you from my years of experience as a pharmacy consultant and working on the PBM side, I’ve sat in plenty of meetings with HR professionals at Fortune 500 companies, and it was very rare that the CFO or CEO was ever in those meetings.
[00:20:05] Mark: Of course, and the last thing I wanted to spend time on was sitting in a meeting listening to the details of my insurance policies.
[00:20:13] Stacey: The one barrier that I see here, and this is something that, for example, Rob Andrews from the HTA has said, he said, morally abhorrent doesn’t move the needle. What moves the needle is financial implications.
[00:20:25] Mark: Yes and no, right? Morally abhorrent doesn’t move the needle unless it’s on the front page of the paper.
[00:20:31] Stacey: Fair enough.
[00:20:32] Mark: Nobody wants to be that headline. And they know me at this point? If I’m out there saying I want to fuck up the insurance industry, excuse my French, they know I’m not going to take any prisoners. And they also know when we sit down to talk, once you go through it, you realize that what we’re trying to do is just simplify the industry, not go through these wholesale changes.
I think over the last 10, 15 years, when you talk about changing the healthcare industry, it’s all been about technology. We’re going to have this or that technology that’s going to optimize this or that. That’s none of it. I mean, this industry is so, so simple. If these companies just act in their own best financial and employee interest, they can simplify this very quickly because if the big three PBMs, which also own the insurance companies, lose 5 of the top 15 non-PBM Fortune 50 companies, their business practices are going to change. That’s a guarantee. They will go down kicking and screaming, but they will eventually have to change their business practices.
And that’s the mission. There’s no reason to use a big three–owned insurance company to do your TPAs because they’re just going to squeeze you left and right. You just need somebody to do your, your authorizations independently. Or like with us, our approach is going to be—and we’re trying to work this out—putting together a healthcare network, which is the hardest part, paying Medicare rates.
But when one of our employees walks in the door, they’re going to have a company credit card and they’re going to know the exact rate and they’re just going to pay. So, the process will be: Doctor says you need this care; pay for the doctor with our credit card. The rates have already been negotiated. Do I have to go to the hospital for something bigger? Rates have already been negotiated. You walk in with our credit card, you pay. There’s no prior authorizations, there’s no clawbacks, there’s no denials, there’s nothing. Because the fundamental issue is, either we trust the care providers that, that we’re working with, or we don’t. And we’re going to audit it, and if you give us reasons not to trust you, then we’ll stop working with you.
But no paperwork, no coding, none of that stuff of what there’s coding because you have to associate the rate. All we want to do is simplify it. We want to have a 1950s care package where the doctor prescribes the medication, you go to the pharmacy (hopefully Cost Plus Drugs), and you buy the medication.
That’s it. The company, you have your insurance to your company, then your company credit card pays for it. The pharmacy gets paid a fee on top of that for providing hopefully great service. That pays for the med right at our Cost Plus pricing. And then if you break an arm or you have surgery, you need to have your hip replaced, you need to have a stent implanted, then we know pretty much what the price is. We’ll pay for the consumables. And you walk in, you give the credit card, the provider is immediately paid. That’s it. No fuss, no muss. That’s it. I’ll buy the reinsurance in case it’s something crazy that happens.
[00:23:33] Ferrin: I’m really excited to hear about just the changing in consumer behavior, because that’s been one of the largest challenges for Scripta and Mark Cuban Cost Plus and many people is this whole new way of thinking about things for plan members as they’re used to spending seven minutes or less with their doctor; getting in electronic scripts into their nearest pharmacy, which is likely a mega chain; and then having that casino-like experience where they get to the pharmacy hoping that they’re going to be able to afford the drug. If they can, they’ll pick it up; and if they can’t, they don’t get it.
So, I’m just so happy to hear that there’s all of these hands and innovative thinkers now trying to solve this problem for patients who really need the help.
[00:24:10] Mark: Well, you guys at Scripta are, you know, are trying to do the same thing, right? And just make sure that there’s transparency in their information, which is why it’s a great partnership.
[00:24:18] Ferrin: Transparency is a huge part of building that trust. And at Scripta, that’s what we’re giving self-insured plan sponsors and their members.
[00:24:25] Mark: But at the same time, changing that behavior is not going to happen quickly, unless it happens at the employer level, because that’s where the numbers are.
[00:24:32] Stacey: What all of this is adding up to is really important reasons why the CFOs and CEOs at the self-insured employers may want to treat their small insurance company that they are running, whether they want to acknowledge the reality of that or not, they are running through their company, a small insurance company.
They really have the power to affect this huge spend. Getting taken advantage of is not a given. Using the best practices that makes their core business so successful, it’s, it’s not like any of these individuals can’t dig in.
[00:25:02] Mark: Right, and I can understand it’s not a core competency so they don’t want to spend time. That was my mindset. You want to work with a provider that you can trust. Just take a step back. The missing element in all of healthcare, outside the patient-doctor relationship, is trust. Nobody trusts any part of it.
And that’s what Cost Plus Drugs has tried to introduce. You, you know what we pay for our medications, you know what we mark it up, and you can trust the price. We don’t change it. We don’t send you to different pharmacies to get that price. It is our cost plus 15%. Period. End of story. And our business is very simple. We buy drugs, and we sell drugs. That is what engenders trust. What we’re trying to do for my companies is find a provider that we can trust.
And I think providers want to be trusted. It’s just that they’re so caught up being inside the system, they have to work the way they have to work. I mean, when you look at pricing, transparent pricing in the hospitals and the rules where they have to put the 300 most popular procedures on their Web site, and then we did a study where we called to see if the price they gave us over the phone for cash price matched the cash price they put on the Web site—and it never did, right? And it just tells you that they’re not fully committed to doing it, but more importantly, when you look at the cash prices, they also have to put the different insurance networks or insurance companies that they’ve done deals with, and you see the insurance prices are so much higher.
Now, why is that the case? That’s the case because when you put yourself in the shoes of the hospital or the provider, they don’t know where their next dollar is coming from; so they get, they’ve tried to limit … they try to become part of a limited network for the insurance companies because they figure the insurance companies have the lives and those lives will get sick at some point. And so, they’re hoping by charging the insurance companies more, then they’ll make more that way, right? Which makes no sense, because that way they’re not aligned with the patients.
So, what we’re saying with what we’re doing is we’re going to these providers and said, there’s no reason for me to write a check to an insurance company or a consultant. I’ll write it to you.
[00:27:05] Stacey: You’re paying them some kind of capitated per member per month is what I’m understanding. So, provider organizations are getting the premium dollars instead of the insurance company. You’re calling this subscription revenue.
[00:27:15] Mark: Now, all of a sudden, hospitals have a steady state of subscription revenue. Now they know where their next dollar is coming from, so they can charge less. And if they use subscription revenues and that is counted against the actual cost of care, which is at a Medicare rate, now, all of a sudden, they don’t have all those administrative costs that are 10%, 20%, 30% of their overhead.
And they don’t need to pay all those revenue generation consultants. And they don’t have to deal with challenging everything, all the denials. And their doctors don’t have to do a ton of paperwork, because everything has been simplified. And that’s our mission beyond prescriptions: to simplify everything, everything in the healthcare chain. And I think it might take 20 years, but we can get there because it just makes economic sense and it makes better healthcare sense for all the stakeholders other than the insurers and the PBMs. And we don’t care about that.
[00:28:10] Stacey: Obviously the system is perfectly designed to produce the results that it produces because here we are. The entire cycle here is, is built upon this foundation of secrecy to a large degree. Like, you have this weird perception that the only thing that’s driving competitive edge is hiding data from customers within the healthcare industry. And obviously you feel different. You’ve created a company in which the business model is transparency.
[00:28:40] Ferrin: We can’t forget that this pharmacy benefits industry is massive, right? It’s driving over a fourth a trillion in drug sales annually, and it’s serving nearly half of all Americans. We know what’s missing is transparency. And suddenly, when you have companies like Mark Cuban’s publishing prices openly and transparently, and companies like ours helping members who actually have a shopping comparison tool just like everything else that they buy, it is game changing. It’s really exciting.
[00:29:10] Stacey: There’s a study that is coming out. What they showed is that if a member is in their deductible phase, 40% to 79% of the time, they can get a better price elsewhere, not going through their insurance. Which is striking, if you think about it, because like, there is this overarching perception, and I’m kind of circling back on what you were talking about before, Ferrin.
In fact, a couple of years ago, they surveyed Americans and 86% of Americans thought that if they went through their insurance, that was automatically and always going to be the cheapest price for a med. I do feel like Mark with your, with just the acclaim that you have, that perception is starting to change.
[00:29:47] Mark: So, you’re saying I have a big mouth, which I agree with.
[00:29:51] Stacey: Every time I hear you talking, I’m like, “Go, Mark!” But it’s not only changing, I think, consumer behavior and just more and more people, and of course, we’ve got good Rx marketing as well. So there is, is this, maybe, critical mass of organizations who are fighting against that perception. But I was speaking with a union leader last week who said that every time, Mark, you go on a rampage about a certain drug and just start talking about it. Like, I think imatinib is the really big example where, yeah, it was like $9000 or something like that, and you guys at Mark Cuban Cost Plus Drugs started selling it for $13.
And all of a sudden, the PBMs start to react.
[00:30:33] Mark: Yeah, they changed their pricing. They changed their pricing. They really do.
[00:30:37] Stacey: So, if we’re thinking about just the impact of what’s going on here, you think about a patient who cannot afford to get chemo because imatinib, this is generic Gleevec, right? It’s chemo.
If a PBM is charging plan and members nine grand for a drug that can be bought for $13 … So, like if you have a cost sharing—just thinking about this from the patient standpoint—if the patient has a 10% coinsurance, that patient, this patient is now spending hundreds of dollars out of pocket. And we have, you know, we know that if the price of the drug goes up into the hundreds, the abandonment rate, it’s over half of patients.
And these are oncology patients we’re talking about. So now you have ...
[00:31:12] Mark: And look, there’s a reason why the PBMs create their own “specialty pharmacies,” and they include high-price generics in their specialty pharmacies. And when they do deals with companies, they require them more often than not to buy from their specialty pharmacies because that’s where the biggest profits are.
So, if it’s imatinib and they’re probably buying at a better price than we are and they’re paying 15 bucks and they’re selling it for $2000, hell, that’s a great business if you can get it.
[00:31:42] Stacey: Do you have plans to expand your medication list into drugs that are more in the special ...
[00:31:47] Mark: Oh yeah, no, we want everything, right?
We want, we, anything that we’re legally allowed to carry, we want to carry. And we’re getting more and more brands, typically the brands we get now like Invokana or brands that are not on the formularies of the big three so there’s no harm to letting us sell it. But as we build our retail network of independent pharmacies and Kroger and grocery stores, those brands are saying, look, we want to work with you because also part of our mission is supporting independent pharmacies. Because right now the big pharmacy chains that are owned by the PBMs are basically just buying them and opening next door and doing everything possible to make it difficult.
And on top of that, those pharmacies are losing money on most of the fills for brand medications. Xarelto, Eliquis, you name it, they lose money on those fills, which is insane. So, we’re going to the pharmacies and saying, look, sign up and become part of our network. And thousands have and thousands more are coming, and we’re going to go to the brands and we’re going to guarantee that you make money on every fill.
Because the only reason you lose money is, you know, if you think of this from the perspective of an independent pharmacy, they go to a big three wholesaler, not big three PBM, but big three wholesaler or their GPO. They’re paying WAC. And I hate all the acronyms in this industry.
[00:33:11] Stacey: WAC is wholesale acquisition cost.
[00:33:13] Mark: They’re paying WAC minus, let’s say 6%. And then if someone comes in with a benefits card, then they get reimbursed from the insurance company. They’re getting reimbursed at WAC minus 8%, right? So, they’re losing some amounts, and they’re not getting paid. On top of that, they’re not getting paid for the pharmacist’s time.
And if that fill is not an insurance fill or benefits fill, it’s from a discount card. A lot of those discount cards are asking the pharmacy to pay them because of the traffic. And so, they’re losing even more. So, the net result of that is a lot of independent pharmacies are saying we won’t fill brand prescriptions unless it’s for a Medicare patient, because a typical Medicare patient takes a lot more medications and they want to keep their business. They’ll eat the loss for those knowing they may be able to make it up on the generics.
[00:34:06] Stacey: Point you’re making being that indie pharmacies through PBM payment practices where they are reimbursed less than their cost and/or through other discount cards.
So many indie pharmacies cannot stay in business. So, patients and employers are being overcharged, while pharmacies aren’t able to cover their costs.
[00:34:25] Mark: Who hates that the most other than patients? The brands. Can you imagine being a brand pharmacy manufacturer and you’ve got brand medications that you’re trying to get out there and the method of delivery, pharmacies, lose money every time they sell your product? That’s the worst possible situation to be in. So, they’re saying to us, build your network, give us a way to get out because this is just not going to work.
[00:34:53] Stacey: So, pharma manufacturers are encouraging you to build out your network and sell their products.
[00:34:57] Mark: And so, when you see our, our network or pharmacy network, we’re paying a minimum of $8 to the pharmacist for filling anything that comes in from our benefits card. We’re trying to get that price up to $10. 50 or even more if it’s a fill for 90 units, right? So, if you get a prescription for 30 days, we’ll pay you $8, hopefully going to $10. If you fill for 90 days, which lowers the price even more per unit, it’s more rewarding to you as the pharmacist. But the bottom line is, we want to help the pharmacies stay in business because pharmacies are a critical connection, particularly to an older population that needs the support from the pharmacist.
You guys know that in your bones, right? But the way the system is designed, the PBMs don’t care. They just don’t care.
[00:35:47] Stacey: I do feel like independent pharmacies are a very underappreciated cog in our healthcare system, especially for older patients and also for rural patients. And these, these indies just between the, the fees and the clawbacks, they have been ... the business model is being decimated. They’ve been going out of business or selling to the chains. And then we see stuff like …
[00:36:09] Mark: For next to nothing.
[00:36:10] Stacey: Rite Aid just went out of business. CVS is closing all these stores. And what winds up happening at the end of the day, which we’re sort of at right now, there’s so many, they call them pharmacy deserts.
So, if the pharmacist was the healthcare professional in the local community that was, to your, using your words, known and trusted providing accurate medical information, etc. for that local community.
[00:36:31] Mark: They’re gone.
[00:36:32] Stacey: Yeah, now they’re gone. And you wind up with some public health problems that are ...
[00:36:36] Mark: Hey, look, from a Cost Plus Drugs perspective, it’s better for us on the surface because that means more mail order, right? But it’s not the right thing to do. It is not the right thing to do, so we want to support every independent pharmacist. We’re learning a lot as we go, and we’re going to make sure they get paid more when they work with us. But the bigger point is those brands don’t want to give money back to the PBMs who, you know, are double count, double charging them that are just fees, charge them for their own data.
There’s just so much nonsense that goes on. So, the brands are saying, the big-name manufacturers are saying, please figure this out. I’d rather pay the independent pharmacists or even any pharmacy for fulfilling our medications, our branded medications, than pay it to the PBMs and rebates or anything else.
And so, as we’re able to build our network, as we’re able to extract self-insured companies from the traditional system, all those things start to fall into place and the whole system begins to be simplified.
[00:37:36] Stacey: Let me ask you this, though. This is definitely a follow-on to your comments about the independent pharmacies because one of the things that a patient who goes to one particular pharmacy to fill their meds gets as part of that transaction, they get the relationship as well as somebody keeping track of, for example, med-med interactions. Like, one of the downsides from patients that has been brought up a lot, if you do have a patient who’s going here for the $4 fill and then they’re getting some of their meds some places, there could actually be very dangerous med-med interactions.
[00:38:08] Mark: Well, we do have pharmacies. Every, every script is reviewed. Every account, like, with my account, I list all my medications that I take; and all that gets reviewed by a pharmacist.
[00:38:17] Stacey: Got it. But, but like if, if you have the patient getting fills all over the place?
[00:38:22] Mark: That’s the difference. But with us, as long as you list, even if you’re getting something filled somewhere else.
So, if you’re getting your metformin filled somewhere else and your imatinib with us, whatever, that’s okay. Just list it and our pharmacist will tell you if there’s a conflict. That’s the goal.
[00:38:35] Stacey: And is there any other things besides lowering prices as if that’s not enough, but are there any other factors that are impacting kind of what you consider value for Americans here?
[00:38:47] Mark: Well, yeah, we work with clinics for homeless people. The clinic will just, you’ll get the prescription for the individual. The clinic will put in their clinic credit card, we’ll deliver to the clinic, and they’ll provide it to the homeless person. There’s all kinds of ways that we can help and we’re trying to help that make it a good experience.
Now, we’re not perfect. We’re growing too fast in a lot of respects and it’s hard to keep up, but we’ll continue to get better. So, we’re a long way from being optimal, but we’re working as fast as we can. Here we are talking about the impact Cost Plus Drugs has had, and we only started shipping in January of 2022.
Within 21 months that we’ve been open, that here we are, the big three are worrying what we’re doing and we’re trying to change the industry, so we’ve got a long, long way to go, but we think we’ll get there.
[00:39:34] Stacey: You had mentioned making sure that patients who are uninsured or underinsured or on Medicaid are also served here or can’t go into the pharmacy and just kind of circling this back to employers.
I think a lot of times self-insured employers do not realize that indirectly they are funding their communities on the other side of the equation. Like, if you have Medicaid or hospital serving uninsured or underinsured patients wildly overpaying or overcharging themselves for medications, this ultimately comes out of the pockets of local businesses when their own premiums go up.
I mean, you, you hear that.
[00:40:05] Mark: Oh, yeah, for sure.
[00:40:07] Stacey: Because ...
[00:40:07] Mark: You’re 100% right.
[00:40:08] Stacey: Yeah, there’s, there’s just so much cost shifting that goes on. I mean—and hospitals, do you say this directly—they’re like, “Oh, well, because of all of these expenses over here, we’re going to have to increase the rates that you’re paying, self-insured employer.” Or they use the—this is a whole other topic, but just chucking it in here—they’ll, they’ll use their, the commercial rates as leverage for their Medicare Advantage rates.
[00:40:29] Mark: All you need to know about Medicare Advantage is that every company is doing more and more of it because it’s the most profitable line of their insurance business.
[00:40:36] Stacey: That’s a fact. But at the same time, there was just a study that was done amongst self-insured employers relative to their satisfaction with the performance of their PBMs.
[00:40:44] Mark: I saw that, where they were, they, it was like 7.6 or whatever, 76 on the MPS.
[00:40:49] Stacey: Yeah. So, what’s your message there? Self-insured employers seem very satisfied with their PBMs, and most are using the big three.
[00:40:56] Mark: If you don’t know, you’re not going to sound, you don’t want to sound stupid for not knowing. I hired this person to do this. I have no idea what they do. And if you ask me if they do a good job, of course, I’m going to tell you they’re doing a good job, because if I tell you they’re doing a lousy job, that makes me look like an idiot.
[00:41:10] Ferrin: Yeah, and it’s interesting to think about, too, who answered that: HR benefits professionals. What are their goals?
[00:41:16] Mark: No one’s going to, no one’s going to admit to their stupidity.
[00:41:18] Stacey: Actually, that’s a really good, a really good point.
[00:41:21] Mark: Why? Ask me if I hired the right person, I’m going to say yes.
[00:41:24] Stacey: What do you think is going to happen to the prescription drug market 10 to 20 years from now?
[00:41:29] Mark: It’s going to look like the way we want it to. I really think we’re going to simplify it, because as we can educate CEOs about how their sickest employees are subsidizing the system, they’re going to be embarrassed and that’s not going to hold up. That is a social contract that every CEO makes with their employees, that we’re going to do our best to support your health.
So, you see them, mental health, all these new programs, gyms that, that companies add because they want to put their employees in a position to be as healthy as possible and their families. But they just didn’t understand it. Now I’m going to make them understand it as much, as best as I can, and that is going to change it.
[00:42:07] Stacey: This is my fear. What my fear is, is that there’s going to be a CEO or a CFO who listens to this show and then turns around and barks at their HR team …
[00:42:17] Mark: Of course.
[00:42:18] Stacey: “Hey, you guys need to do a better job here.” When we all know, those of us who have been doing this for a while, one of the things that we all realize is that it’s an impossible task for the HR teams.
They need the expertise, really. They, they need the help of the C-suite to provide the air cover, number one. And then also ...
[00:42:40] Mark: What you’re missing, Stacey, is they’re going to need air cover from me. When I’m talking to the CEOs, They’re all giving me the time. No one’s saying, “Okay, this doesn’t make sense. There’s no reason for me to talk to you.”
And then they’re bringing, getting me to the HR person who’s justifying what they’re doing, who then goes back to the PBM insurer and says, “Okay, you’re going to have to make these adjustments.” So, I could, if I was able to, I could name you eight, nine self-insured major companies, name-brand companies that extracted their pharmacy benefits from their healthcare plans.
Now the provider side of it is far more difficult. We’ll get there, but they are going back and saying to the insurance company, “If you want the healthcare side of my business, you need to let me do the PBM, the pharmacy benefit side, the way I want to do it, including this PBM that supports Cost Plus Drugs.”
[00:43:32] Stacey: I think one of the points that you’re making very clear, it’s so strange sometimes just the amount of times I hear of where the vendor is telling the customer how it’s going to go down, where the vendor is dictating terms ...
[00:43:46] Mark: And if the consultant is getting paid on both ends, who’s telling them how it’s going to go down?
[00:43:51] Stacey: I love the point that you’re making to these employers, that it is, that they’re the customer, that this is their money. And I never call … If we’re talking about a self-insured employer, I talk about carriers and I talk about administrative services only or ASA contracts. It’s not the carrier who’s providing the insurance. It’s, it’s the employer. It’s the employer’s money that’s at stake here.
[00:44:13] Mark: And then they buy reinsurance. So, the insurance company actually offers zero insurance to, so all they’ve become is an administrative intermediary that you have to question what they do with the premiums you pay. Even though we self-insure, we’re paying a “premium,” a subscription fee to the consultant, and we’re paying something on a per employee per month or per life per month or per family per month to an insurance company. Insane. You were doing that. If you were a employer who were listening to this, you are like me. You are insane.
And you know what? The quickest way in an, in an environment where it’s really—and I’m sorry just to get so like amped up about this—but in an environment where it’s hard to raise money and interest rates are high, the cheapest way to claw back cash to yourself is to stop paying your benefits consultant and stop paying your insurance company and just keep that money to yourself.
[00:45:08] Stacey: And just the amount of money that could be kept. Like, there’s another case study where Allegheny County in Pittsburgh did some stuff and they saved $3 million. The Rosen hotels. It’s just there.
[00:45:20] Mark: Look what Boeing does. They’re like, “Screw that. We’re not going to do …” There’s a beer distributor that we’re working with that has put together a healthcare program and a network of cash-pay providers where he made it available to beer distributors, and we’re going to use them.
[00:45:35] Stacey: This is L&F Distributors.
[00:45:37] Mark: And we’re going to use them at Mark Cuban Companies because he realized this was insane, and he’s taken a lot of amazing steps to simplify and cost reduce the entire process. It’s not hard. It’s not hard.
Now, let me take a step back. If you’re trying to replace your provider network, that can be a little bit finicky because the providers aren’t comfortable necessarily just changing everything. It’s hard for the CEOs of a hospital system just to change. But they, they know they want to get there and there’s a path to get there.
[00:46:10] Stacey: Yeah, you’re going to find purpose-driven individuals across the industry who are scrambling for every penny at this juncture just desperate for someone to pay them to do the right thing.
I think what you are offering here is a way for those who do understand that transparency is, in fact, a business model, that you can function as an organization with its fees up front, wherein your customers are on board with what they are paying for—that this is, in fact, a viable way to go forward that can actually be a win-win for all involved, which is not ...
[00:46:46] Mark: If you don’t, I’m going to find one of your employees and I’m going to take them to the Wall Street Journal and I’m going to have them talk about how they spend money on the deductibles. And then I’m going to show the typical price that the PBM charges your self-insured company for that medication that eats up their deductible. And then I’m going to show them the Cost Plus Drugs price and how, if you were to use the Cost Plus Drug price, that employee never would have reached their deductible, would have saved money, would be better healthcare, would be better adherence, et cetera, et cetera, all because you were lazy. That’s what I’m going to do.
[00:47:17] Stacey: And just to add some even stakes to that, obviously this has legal repercussions as well because of ERISA. Like, every self-insured employer is actually the one that is the fiduciary here, and they are required to spend plan money prudently without conflict of interest. So, if we have an employee who goes with Mark to the Wall Street Journal and starts talking about this, the other thing that’s implicit in this is that the plan is not acting prudently as, as the fiduciary. And obviously, we’ve got the Consolidated Appropriations Act, we’ve got ERISA …
[00:47:48] Mark: Is it HHS who enforces that? I don’t even know who enforces that.
[00:47:52] Stacey: The Department of Labor.
[00:47:53] Mark: How great would it be if they sued somebody?
[00:47:55] Stacey: So, what’s happening right now, employers right now are suing their carriers. Those lawsuits are currently ongoing, but there are, I’m going to call them ambulance chasers right now on LinkedIn, for example, who are trying to find plan members to go after the employers at the same time.
It is getting interesting from a legal perspective. That should also be a bit of a wake-up call for some of these self-insured employers who are, I don’t know what they’re hoping that this whole thing is going to go away, but, but there’s legal jeopardy at this juncture but then also all of the financial implications.
[00:48:28] Mark: Can you send me a link to those lawsuits?
[00:48:30] Stacey: I will send you lots of links. There’s a lot going on.
[00:48:33] Ferrin: And I guess what’s important to hear is the, the real difference with Mark Cuban, in, in my opinion, is that he can’t be bought. I’ve worked with plenty of forward-thinking, innovative HR benefits professionals. They are out there. They’re very passionate. They do want to do the right thing. We’ve had innovative vendors come in before, and they are providing transparency for a small amount of time. And then they get bought by one of the big three, and now they’re part of the problem.
[00:49:01] Mark: You were so right. One of the companies that we’re dealing with that’s working with these big companies and converting them to extract their, their pharmacy benefits has already got offers from the PBMs.
[00:49:11] Ferrin: Of course, and that’s what’s happened really time and time again.
[00:49:15] Mark: Yes. We got inquiries right when we got started. Will we sell the company? I’m like, you know what? Eff off.
I want to bring up one more point before I forget. I’m neither pro union or anti-union. I’m, it just depends on the circumstances. I pay a lot of money to union employees, and I’m fine with it. And I have a lot of nonunion companies, and I’m fine with that as well.
But I think with unions, instead of trying to go to the big companies, where they tend to focus their time because they have the most employees, if they went to the smaller companies where the individual employees either use the ACA or it’s a super expensive healthcare plan for that small- to medium-sized company and just took over their healthcare and save that company a ton of money, those companies would save so much money, they would love to have the unions in their organization.
[00:50:01] Stacey: This is actually what 32BJ does, and 32BJ saved $35 million last year for their union members and their employers. And in fact, some of the mid-market companies are really the most able to do the most with healthcare because a lot of times the employees are in one geographic space. They don’t have employees spread all over the country.
[00:50:21] Mark: So, it’s easier to do a network and cover it.
[00:50:23] Stacey: All right, totally switching gears here. You want to hear my top two crowdsourced questions?
[00:50:27] Mark: Go ahead. Fire away.
[00:50:28] Stacey: Okay, here’s the first one. Why is Mark Cuban lowering drug prices and not blasting himself into space or tweeting out narcissistic bullshit? Doesn’t he know how to billionaire?
[00:50:37] Mark: Yeah, ’cause I’m afraid of heights.
[00:50:40] Stacey: Here’s the second one, which is not a question. It’s a comment. If a coach commits a technical foul, the other coach should have a chance to throw free throws.
[00:50:50] Mark: That would be funny as hell having a coach in a suit come out there and make some free throws, but that would be entertaining.
[00:50:55] Stacey: Mark, is there anything that you would like to add to close up this conversation?
[00:50:59] Mark: I appreciate you guys having me on. I appreciate what we’re doing with Ferrin. It’s been great. It’s going to be a process. But I think the key, when you’re in the industry, it’s really easy to focus on the details, the inside baseball type things.
That kind of makes all the CEOs and the CFOs, their eyes gloss over. And I think the real change is going to come from humanizing the problem. Going, as I said, to individuals with high-deductible plans as part of a self-insured employer, having them tell their story. Because when that story bubbles up to the CFO and CEO, they have to respond. When it’s one person, maybe they’ll dismiss it.
But when you start asking over and over and over again, so for you guys, as an example, or as a consultant, or trying to get the word out of how do you save money? That’s what I would do. When you’re online and, or when you’re at events, see if you can get into companies or ask for people with high-deductible plans that worked for big companies and give their experience on how much they’re having to pay out of pocket for pharmacy initially. Put aside the healthcare side, because that’s a bigger mess and more difficult to deal with. But on pharmacy specifically, let us know what you’re going through and what your deductible is and how much you have to pay to meet that deductible and let us take that to your CEO.
And we’ll protect you. We won’t, we won’t give them your name unless you want us to. But by humanizing it like that, that’s where the change comes from because the CEOs … inherently in a big company, if you’re big enough to self-insure, and particularly if you’re a Fortune 500 company, you want the best solution because improved health means improved productivity, which means improved profitability—and every CEO knows that in their core.
It’s not that they’re trying to screw over their employees and maximize their rebate or any of that. It’s just not part of their core competency, and if it’s not part of their core competency for their business, they’re just going to delegate that. But if you humanize it and put it on the front page where people can see it, they will respond. And I think that’s the greater approach to create change, as opposed to just talking to HR and say, “Well, why don’t you do this? Look at Mark Cuban’s prices compared to yours.” That helps, but that’s not going to create quick change. That’s the slow grind and I’ll ...
[00:53:16] Stacey: There is a problem, and solving for it really needs to happen. Ferrin Williams, is there anything that you would like to add and where can people find out more about Scripta?
[00:53:24] Ferrin: Sure. Thank you. Yeah. I mean, I would just say that the time is now. We have Mark Cuban. We have solutions like Scripta, HR benefits professionals who have been kind of banging their heads against the wall for the last 20 years trying to really add value and lower costs and give their plan members options.
It’s available now. It’s out there. We can help. The help is here. I’m excited about it. Mark Cuban’s Cost Plus cannot be bought. It’s here to stay. So, yeah, if you’re, you can contact me on LinkedIn, Ferrin Williams. Or go to Scripta Insights to learn more, but I’m just so happy that the time is here. Please believe that I know those of us who have been in this for 20 plus years, we’ve thought that different times in our careers, but I really believe that this is different.
[00:54:12] Stacey: So, scriptainsights.com, costplusdrugs.com. Mark Cuban and Ferrin Williams, thank you so much for being on Relentless Health Value today.
[00:54:20] Mark: Thanks for having us on, Stacey.
[00:54:20] Ferrin: Thank you.
[00:54:22] Stacey: I just want to end here giving some thanks to Ge Bai, Andreas Mang, Lauren Vela, Andrew Gordon, Andrew Williams, Cora Opsahl, Kevin Lyons, Pat Counihan, David Dierk, Connor Dierk, John Herrick, Helen Pfister, Kristin Begley, AJ Loiacono, and Joey Dizenhouse for your help preparing for this interview.