Mark Cuban Takes on America’s $5 Trillion Healthcare System: “Their Response Time is Unacceptable”

Billionaire investor and entrepreneur Mark Cuban expresses strong opinions about the flaws in the U.S. healthcare system.

“No one examines the financial aspects of healthcare and thinks, ‘This is how it should function,’” Cuban remarked during his recent visit to the Equity podcast. “When you go to a doctor and get a prescription . . . you have no idea what your out-of-pocket cost will be. You don’t even know if it’s within your budget.”

The former “Shark Tank” investor and minority owner of the Dallas Mavericks elaborated on the root of the problem: Drug prices are largely dictated by pharmacy benefit managers (PBMs), who serve as intermediaries in drug prescription programs. He asserted that the pricing framework is purposefully made confusing.

This is why he launched Cost Plus Drugs in 2022 — to clarify drug pricing, lower costs for consumers, and shake up the traditional pharmacy model.

“They determine prices based on market conditions; we price according to actual costs,” he clarified.

The difference is significant. For example, a generic chemotherapy medication that can cost thousands at a pharmacy may be priced at “$21 from Cost Plus Drugs,” Cuban noted.

Cuban’s approach significantly deviates from typical U.S. drug pricing. As suggested by its name, Cost Plus Drugs offers medications directly to consumers at a straightforward price — the manufacturing cost plus a 15% markup, a $5 pharmacy fee, and shipping costs.

“We’re also providing the choice to pick up prescriptions at local pharmacies,” Cuban mentioned.

To understand the revolutionary nature of Cuban’s model, one must consider the factors contributing to soaring drug prices. The pharmaceutical industry has defended its high prices in the U.S.—a rare affluent country without government-regulated or negotiated drug costs—by claiming that without substantial profits, they wouldn’t be able to fund the billions needed for new drug development.

Critics argue that the pricing tends to prioritize profits over actual R&D expenditures. A 2021 study showed that profits from the top 20 best-selling drugs were adequate for companies to recoup their R&D investments, leaving billions in profit.

Cuban pointed out another aspect that drives up prices in the U.S.: manufactured shortages. “Believe it or not, even today, there are vital drugs such as pediatric cancer medications, Pitocin, sterile water, among others, in limited supply because manufacturers deliberately restrict availability to inflate prices,” he stated.

While there’s limited evidence of intentional profiteering, it is clear that prices surge during shortages.

His solution? To create his own manufacturing facility. Cuban owns a factory in Dallas that is “fully automated with robotics.”

“We’ve established a factory capable of developing a new drug in just four hours and delivering it straight to hospitals,” he continued. “And we’re actively working on these shortages.”

While delivering medications to patients yields minimal profits, other segments of Cost Plus Drugs, like manufacturing, offer higher margins and contribute to overall profitability. Manufacturing also acts as a means of contesting the existing drug supply chain.

However, Cuban’s vision goes beyond simply offering more affordable medications—he aims to reinvent the traditional rules. “People said . . . you can’t compete with these huge companies, the insurers, the PBMs,” he recalled. “I thought, ‘I will just avoid them. I won’t conform to their ways because they don’t benefit patients.’”

Even Amazon, Cuban noted, has fallen into this pattern. The tech giant has teamed up with PBMs through Amazon Pharmacy, putting it in a compromising position as it remains “beholden to PBMs.”

His advice to entrepreneurs who wish to disrupt established players?

“Stay away from relying on them,” he suggested. “If I were 25 and starting this business, I might consider collaborating with pharmacy benefit managers because that could seem like a lucrative path. The entire healthcare sector is pretty much an arbitrage. How can I capture a small portion of a $5 trillion market using technology, pricing strategies, or other methods?”

“When I started, someone once told me: ‘When you run with the elephants, you’ve got the swift and the dead,’” Cuban reflected. “You have to be fast or risk getting left behind; you need to be nimble, lean, and continuously seek improvements, as it’s all tied to the Innovator’s Dilemma for [the incumbents]. They must safeguard their legacy businesses but can’t adapt quickly. This inertia will always give an advantage to newer founders.”