FHC #229: Revisiting Mark Cuban’s prescription for lowering healthcare costs

0:11Dr. Robert Pearl: Hello and welcome to the Fixing Healthcare podcast. I'm one of your hosts, Jeremy Corr, also host of the Pop Unit Books and Medicine podcast and CEO of Executive Podcast Solutions. With me is Dr. Robert Pearl. For 18 years, Robert was the CEO of the Permanente Group, the nation's largest physician group. He is currently a Forbes contributor, a professor at both the Stanford University School of Medicine and Business and is author of the best-selling book, ChatGPTMD, How AI-Empowered Patients and Doctors Can Take Back Control of American Medicine. If you want information on a broad range of topics, you can visit his website, robertperlmd.com.

0:40Dr. Robert Pearl: Our guest today is Mark Cuban. He's the founder and owner of the Dallas Mavericks, a longtime shark on the hit show Shark Tank, and the founder of Cost Plus Drugs. Straight out of NPR. Great intro.

0:54Jeremy Corr: Hey, Mark, welcome to Fixing Healthcare. Thanks for having me. I'm excited to be here. We're in season number 11. And on 10 seasons, we had experts, healthcare experts. We had presidential candidates. We had authors like Malcolm Gladwell, Atul Gawande. And we had the top people, the CEOs and the healthcare leaders from companies like Google and Microsoft, Avidia, Oracle. This season, we want to have a broader group of individuals and someone who has owned a world champion basketball team, been a shark on Shark Tank, the very successful TV show, and now has started Cost Plus Drugs, a pharmaceutical chain.

1:44Jeremy Corr: I can't think of anyone who would be more diverse than yourself. So welcome here today, Mark. And maybe we should start by talking about cost plus drugs. How did you think about it? How did it begin? It began because I got a cold email from a Dr. Alex Oshmiansky. And he wanted to start a compounding pharmacy in Denver because there are still generic injectables, sterile generic injectables that go on shortage list. They go in short supply. And when they go in short supply, not only are they difficult to find, but the prices go up. And so he emailed me about that. And I did some looking into it.

2:20But it was right around the time the pharma bro was going to jail. And so I was like, how can this dude jack up the price of this generic drug, Daraprim, by a factor of 7, 10, whatever it was? And I started digging into it. And the more I looked, the more I realized just how opaque the entire pharmaceutical and, for that matter, the medical industry is. And so as an entrepreneur, I saw it as an opportunity. If this entire industry is opaque, if the minute you get a prescription, the only question they ask is what pharmacy do you use and don't have any questions or discussions about cost, there's an opportunity there.

2:56So in January of 2022, we launched CostPlusDrugs.com. And the foundation of it is when you go to CostPlusDrugs.com, you put in the name of the medication, whatever it may be, and we show you our cost, our actual cost. And then we show you that our markup is only 15%. And if you get a mail order, it's a$5 shipping fee. And in doing so, turns out all of our costs, all of our prices, particularly for any specialty generics, were dramatically lower. With the exception of, you know, the$4 drugs at Walmart and, you know, the low-cost generics that don't need to be disruptive. And so we started with 111 medications.

3:36Now we're into the thousands and we've helped millions of people. and we just keep on growing, but we've expanded beyond just our website. So, but let me just add as a salesperson and a shark, if you have a prescription for any medication, check out costplusdrugs.com, see if we carry it and we carry thousands, but we don't carry everything. There's a really good chance we're going to be cheaper than your coinsurance or your deductible, or if you're under or under a non-insured, we'll be very reasonable to what you'll get from most pharmacies. So next to that, we did build the compounding pharmacy, and it's all robotically driven in Dallas, Texas.

4:14And we do make sterile injectables, pitocin, sterile water, pediatric cancer drugs, and it's been a great start for us. And so, and we'll continue to expand there. And because we're robotically driven, we've been able to improve the technology over the last few years as robotics and AI technology has gotten better. And so not only can we do sterile injectables, but we're in the process of doing biologics, including biosimilars. We haven't launched that yet, but we're getting closer and closer. And we're very close. When I say close, probably hopefully within the next year to be doing end of one medications as well that we'll be able to manufacture.

4:52And because we're robotic, we can turn our line in four to six hours and get something done. And the biggest delay factor we have is really just getting all the FDA approvals that are required. And then the third part of our business, we recognize that at hospitals, they pay insane amount of money for injectable drugs and drugs of all kind. You would think, you know, any hospital would be able to buy at a good price, but it turns out that's not the case. And so we created Cost Plus Marketplace. And you can see what we're doing there if you go to business.costplusdrugs.com. And there we do the same thing we do for patients, where for hospitals like Penn Medical, CHS and many others, we have a small markup.

5:37It varies some depending on the product, but we're able to sell far less expensively than most of the current distributors. And we're saving hospitals a million, two million, four million dollars a year. So that's fundamentally our business.

5:53Jeremy Corr: Let's go back. Your company's been around for about three years. Before that, you were an expert on basketball and on business and marketing, but you probably didn't know a whole lot about the drug industry when you got that phone call. Explain to listeners, let's just take a drug at the GLP-1, the weight loss drugs. They are sold retail right now for close to$1 ,000 a month. They cost$5 to manufacture per month, according to studies out of Yale. I would tell you as somebody who can manufacture, it's more than that, but there's a huge markup. Okay. Whatever it is, let's assume it's$100. It's like closer to$29 for us anyway.

6:37Jeremy Corr: Explain to the listeners, how does that happen? How is it possible that this crucial drug that so many Americans need ends up costing 10 times more than the manufacturing expense? That's a loaded question because it's priced differently by customer type. And so if you go to Lilly Direct or Novo Direct, you might pay$350 to$450 to get access to your GLP-1 as a cash-paying direct customer. If you are a company that self-insures, you may pay a choice of$1 ,300 against which you'll receive a rebate or a lower price that might be$700 against which you'll receive a lower rebate. And the reason that it is so mixed up and messed up is because of these middlemen called pharmacy benefit managers.

7:31And the pharmacy benefit managers, what they do as a business is they aggregate lives covered by negotiating with states, by negotiating with public employers and private employers, so that they, between the biggest three of them, they control about 272 million lives. And then they take the formularies that they've created for those 272 million lives and they auction them off to manufacturers, brand manufacturers. In this case, Novo Norsk and Lilly for GLP-1s. And they say to them, if you want to have access to 272 million customers, you have to pay us to get access on our formulary. And in the case of GLP-1s, one of the big three PBMs went so far as to say to hold a bake-off or a bidding war between Novo and Lilly and came to the determination that Novo paid them such a premium, they would no longer offer Lilly's GLP-1s.

8:33And so that, you know, when you ask about GLP-1s and why they're more expensive, well, if a manufacturer, in this case Novo, is paying a huge rebate to the PBM who then may or may not pass it on to the employer, well, if they're paying a big rebate, they're going to have to charge a price that compensates for that rebate and allows them also to net, you know, what they need to net for their product. And that effectively is what causes prices to be so high.

9:05Jeremy Corr: When you were on Shark Tank, you obviously looked at both sides of a transaction. Did the person want to sell? Did you want to buy? Let's look at this industry. I understand why for the drug manufacturers, they want to use the PBMs to be able to get access. No, they actually, yeah, they use them, but they hate them. Right. But they have to use them. Yeah, they have no choice right now. Right. Why would an insurer use them if in the end their customers are paying more money and I'm going to assume the drug companies end up with a higher expense than they could negotiate or obtain through you? Because they typically own them.

9:42So what you're saying is that there's a feedback loop where, yes, it's inefficient, but actually the people who control it, the insurers, benefit as a consequence.

9:50Jeremy Corr: Is that right? That's correct. And think about it from an ACA perspective. So as part of the ACA, when you offer a plan, let's just use a silver plan as an example. You have to have a medical loss ratio of 80 to 85 percent. Right. And one way to gain the medical loss ratio in that silver plan is to pay yourself or charge yourself, in this case, a higher fee. So if you are an insurer that owns a big PBM that's paying a premium and retaining a rebate at the PBM level, well, you might make$300 or$600 on that rebate, but you can charge the insurer that owns you$1 ,300. Now that insurer has reached their medical loss ratio a little bit more quickly because they're paying more money to their own subsidiary.

10:46And so that's part of the logic that goes on within the ACA. And in terms of insurance companies that don't own their own PBMs, what they'll do, what the big PBMs, again, owned by the insurance company. So they're doing this with their parent company's competitor. But what they'll say is, we'll pass through all of our rebates because we need your volume. And then that external insurance company will say, well, we'll use those rebate dollars to push down the cost of premiums. But it's kind of a mismatch because every plan owner benefits a smaller amount because it's amortized over, you know, those rebates were amortized over millions, typically, of plan holders.

11:33But only the people that use that GOP-1 in this case actually really are hurt. And as a result, the people, the plan holders that use the GOP-1s are hurt because they don't get to pass through the entire rebate. And so the person who pays the biggest price in all this is the patient. And I'll give you a perfect example. So for that same GOP-1, if you're in your deductible phase on an ACA plan, right, and you are ACA silver and in 2026, you're paying more premium and your deductible also is going up. and you're paying$1 ,300 a month with a$5 ,200, or let's just say for easy math,$5 ,200 deductible.

12:15So you're paying$1 ,300 each of the first four months at full retail price. Now the crime in that, well, crime's too strong a word. The unfortunate part of that is that that patient in paying the full retail price of that is effectively writing a check to the PBM, who then in turn is writing the check to the insurance company. So the great loser on this, that single plan holder doesn't get the full benefit of the buy down by rebates of the plan premiums. And because they don't, they have to pay the full retail price during their deductible phase for their GLP-1 medication.

13:01Jeremy Corr: And I assume that the companies are also going to benefit in terms of the stock price from the added revenue. Yeah. And for the insurance companies, for sure. Now, if you happen to be a self-insured employer and going through all this, you're in deep doo-doo because you're probably going to be subject to a lawsuit. Because think about what happens for a corporate account. If that same patient that's getting the GOP-1s works for the company that's providing them their insurance, and they have to pay the$1 ,300 a month until they reach their deductible. Let's just say for two months because corporate deductibles are typically lower.

13:41So they're paying$1 ,300 a month until they reach their$2 ,600 deductible, and there's a$600 rebate. Well, their sick employee or their employee who needs care in this particular case is effectively writing a check for the$600 rebate to the PBM, who in turn writes a check to the employer. So by proxy, the patient is writing a check directly to the employer. And that is a violation of every element of ERISA law, because you have to have that fiduciary responsibility to do your best to keep the cost and services quality high and cost low. And by asking your sickest employees who are using drugs that provide rebates to effectively write you a direct check for the value of some portion of that rebate, that's a lawyer's dream.

14:38And that's what they're starting to look at right now. And I think that's going to part two of the problem with PBMs, right? The PBMs benefit from rebates from brand drugs. And because of that, they want all pricing to be what they call whack or wholesale acquisition cost, which from a patient perspective is the retail price. And because the PBMs like to work at the full retail price, so do the big three wholesalers in the industry. There's big PBMs that dominate transactions for prescriptions, and then there's big three wholesalers that dominate even more for transactions to deliver medications to pharmacies who then deliver them to the patients.

15:21Right. And so both of them benefit from working on a from a perspective of we'll work at the list price. And believe it or not, the wholesalers, when they buy from the manufacturers, the brand manufacturers, they pay the full retail list price. And then they get little small discounts that equate to about three and a half percent of that list price. By working at list price, there's no price competition with the other wholesalers. And if this came on Shark Tank, Kevin would tell it to take it out behind the barn and shoot it because it's poor cash management. There's not enough margin. And you're just dumping on pharmacies and patients because the pharmacies have to pay out of pocket near that that retail price in order to get delivery.

16:09that sets them up to be under reimbursed by the PBMs who also extract rent from the pharmacy. And that also is why and how that the patients during their deductible phase pay the full retail price. And so the PBMs advertise themselves as, hey, you need us because we negotiate better prices. But for every patient in their deductible phase, the best they can do is a retail price, which is insane. right? It should be like the hardware business where if a hammer is$49, the wholesaler pays $25, sells it to the hardware store who marks it up. But that's how convoluted the pharmacy business has become.

16:49And that's why it's so hard to change. And that's why CostPlusDrugs.com works outside of the big PBMs. We don't work with them. We work outside of them. We don't work with the big wholesalers. We work outside of them. And that allows us to be lean and mean. That allows us to only have a markup of 15%. That allows us to show our costs. Because if we worked within their game, we would not be allowed to do that.

17:15Jeremy Corr: I know that you love the business models and business school. I teach at Stanford Business School right now. Two by two matrices are always liked. So we can think about the pharmaceutical world as the small molecules, the ones that anyone with a master's degree can probably make in a laboratory across a weekend. the large molecules, the biologicals, things that are massive in scale and scope. And then on the other axis, you have the drugs that are still on the patent and those that are now in the generic world. In which of these four quadrants does your company work right now and where are you going to be moving into in the future?

17:57Jeremy Corr: We work in all of them. The question becomes, why don't we have more skews in the brand aspect, the brand element? Right. We have no problem getting biologics. We're, as I mentioned earlier, we're close to being able to manufacture them. But and we carry almost every generic and we carry some brands, but not all. And the reason is, why do we not carry more brands? And the answer is because the PBMs don't want us to carry brands that are on their formularies because what's happened for specialty generics and, you know, in insurance plans, there's always different plans. If you think about your own insurance, right, for your pharmacy benefit, there's different tiers for the medications.

18:42There might be tier one, tier three, and then there's a tier called specialty tier. And my response always Every drug is special in its own way But there's nothing special about single molecule drugs They're just tablets, they're pills, right? And so what we did for drugs like Imatinib, Droxedopa And others for MS Because we only sell them at cost plus 15 % Our prices are dramatically lower We get emails and letters all the time You know, they told me at the pharmacy it was going to be$900 My insurance agent told me it was going to be$600 Your price is$21.50 or$31.50. Thank you. Now I can afford my medication.

19:21And so we've had that level of impact on the pricing of specialty generics. The PBMs know that once we start publishing prices for branded medications that have large rebates, if we get it at anywhere near their net price after rebate, even if we pay more with only a 15 % markup, we're going to make that market more efficient and destroy their margins for those brand medications. So they tell the big brand manufacturers that, and I wish I could get it in writing, but I can't, but they tell the big brand manufacturers, look, if you work directly with cost plus drugs for any of these drugs that are, you know, lead drugs in our formulary, we're going to look at your entire portfolio and diminish it on our portfolio so that doctor, when a doctor prescribes it, your patients will realize you may not be covered in their plan.

20:12And no brand manufacturer with half a brain is going to take that risk of losing hundreds of millions or billion dollars on any given drug or their portfolio to work with us at this point.

20:24Jeremy Corr: Your background is immense. You've taken whatever you learned in the business world and you've taken it to the Dallas Mavericks and made them a championship team when I don't think anyone at the time thought that was going to be the outcome. I know you're a basketball fan, There's a big difference between being a basketball fan and a basketball owner. Certainly on Shark Tank, you've seen thousands of pitches, many in industries that you don't have any experience in. What did you take out of all of this past exposure when you opened your pharmacy, your cost? That's a great question, Robert. I've never been asked that one before.

21:01So what my skill set, if you will, is I understand technology. I understand business, but it doesn't take me long to get to the heart of a business. What is it that differentiates them, if anything, from their competition? And then from there, what are their leverage points that allows them to be successful or allows them to get any type of pricing authority or pricing advantage and go right to the heart of that? In the case of pharmaceuticals, drugs, it was really simple. It was opacity, right? The more opaque the industry, the less people understand, the greater the information of symmetry and the harder it is for patients in particular and doctors as well to know what a fair price is.

21:41And so the first step was going towards the opacity and bringing clarity and transparency. The second step is looking for those leverage points. In the case of PBMs, it's their formularies, as we mentioned, where they auction it off. So what I've been able to do is go to CEOs of companies who typically, and it's no surprise, it's not a core competency for them to understand their medical or pharmacy benefits. And so I point out to them where they're getting ripped off. So the first thing I'll say to them is, hey, if you're getting a great price from this big PBM, tell them you like to add cost plus drugs to your network.

22:19Because by definition, if they're great at negotiating, our prices should be higher. So there's no downside to them at all. They always say no. No one's ever said yes. Then the second thing I tell them is there's a 99 % chance that you are not getting the rebates you're entitled to. And the costs and fees that they're charging you probably exceed what you expect. And so have you ever audited your rebates? Because I know in every contract that's allowed. And they're like, no. I'm like, go and tell them you want to audit your rebates and your pricing. And here's what they're going to do. They're going to say, sure, it's in your contract.

22:58we'll give you 300 or 3000 claims out of the tens of thousands a year. And you can statistically extrapolate what it would be. And obviously, if it's only a few hundred or thousand claims, they're going to make sure they give you claims that match up correctly. And then they say, and oh, by the way, you have to use the auditing company that we choose, which is affiliated with us. And so I tell them, you know, you laugh at that. And then you tell them. And by the way, part of the underpinning, unless you're just an enormous, enormous company with 500 ,000 plan members, they're not giving you all of your claims.

23:34Just think about that. You know, if you want to understand the GOP-1 adherence in your membership base, your plan base, you really can't do it because they want to upsell you. You're not even allowed to talk to Lily or Novo about wellness plans because that PBM or the associated insurance companies wants to upsell you something. So the second thing I tell the CEO is, here's a couple companies that will do an audit for you. And you can pay them on a fee for service on a percentage saved. And I've spoken to, I don't even know how many organizations where there's somebody in charge of benefits or a CFO.

24:09And I've always asked them, how many people have audited their medical benefit in particular pharmacy? And a smattering of people raised their hand. How many people have ever underpaid? It's been determined by the audit that they've underpaid or it's perfectly aligned. Nobody has ever raised their hand. How many people was it determined that you are underpaid rebates? Everybody raises their hand. What are the percentages? 10, 20, 30, 40%. And so I know by going through these first couple steps that the CEO of this company is going to be upset. And that's going to be the first step towards them moving away from that big PBM.

24:48And it doesn't happen overnight because the minute the big PBM finds out that they're talking to me or someone from my company, they immediately offer them a better deal. Like the state of California, when I was testifying before the Senate about drug pricing, they actually said that they used our price list as a reference to get their PBM to lower their costs and lower their pricing to them. And so we educate an educated consumer, an educated CEO, understanding their benefits costs, which in reality is their second largest expense line item after payroll, is how we take the power or leverage away from the insurance company slash PBMs, because the fewer names that are on the fewer lives that are covered by their formulary, the less leverage they have.

25:38And then now we work with Cost Plus Drugs works with 30 and growing number of what they call pass-through or transparent PBMs that don't pull all the games that they play, don't have undefined fees. Because one of the other things you'll see in these corporate contracts with the PBMs is we may from time to time charge you fees for various services that we determine we need to offer?

26:03Jeremy Corr: The healthcare industry itself, I'm going to use the word bloated, although clinicians are working incredibly hard. The system is broken. Given your background, it wouldn't take you more than a weekend to find lots of ways to cut hundreds of billions of dollars out of the healthcare system. We have hospitals that are very expensive, very high-end capital that we run basically five days a week outside of emergencies. You know, we have the most common way that doctors communicate with each other today is the fax machine, an 1834 invention. My students in the business school don't even know what a fax machine is.

26:44Jeremy Corr: Yeah. Absolutely. We have a fragmented industry with lack of communication. We have 400 ,000 people die annually from misdiagnoses. The list goes on and on. And it's so clear to me you've become an expert in the pharmaceutical world. Have you thought about other parts of medicine where you might bring the same value? And if so, how do you think about going about accomplishing it? Okay. So another great question. You've got to look at how the money flows and how different stakeholders make money. And so let's start with the insurance side of it. The whole thing starts with an insurance plan that's created.

27:24And then that insurance plan typically is based off of either a higher premium, lower deductible or vice versa, lower premium, higher deductible. And when they offer those plans, either through the ACA, through self-insured employers or to group to small businesses, right, the businesses decide which plans to offer. like you guys probably go through this process every year as my employees do. And then when the plan holder or the employee or the family makes the determination, typically the less income they have, the higher the deductible they'll choose because they want the lower premium. But what never happens is a credit check on the ability of that patient to pay for their deductible.

28:11And that starts this imprecise and vicious cycle throughout the entire ecosystem of health care. And let me explain. So when somebody comes to your hospital and if they're still in the deductible phase, twenty five hundred dollars for a corporate account for fifty two hundred dollars for that ACA silver plan. Right. If they can't afford it, bad things start to happen. So typically the hospital will say, okay, we can loan you the money You know, you have a job We'll become now they become subprime lenders, right? Or they'll say here's a third-party financing company But immediately as a subprime lender or using a third party In order to get access to the post-deductible phase of that insurance policy They're going to lose a lot of money And they're going to be the scapegoats for the trillion dollars or whatever it is a medical debt because that trillion dollars isn't owned to the insurance company.

29:08That's not a trillion dollars in premium because if you don't pay your premium, you're booted out of the ecosystem, right? So all of that is effectively to hospitals and doctors and clinics and providers. So now we've turned them into subprime lenders and depending on where you're located, you may collect 50%. So you're writing off 50 % of the volume that you've had to loan. And so immediately the provider, their back is against the wall for some amount of money. Then we can continue on. And you probably know better than I do. Those big insurance companies negotiate with the hospital for rates.

29:45And that might be they negotiate with your hospital a$25 ,000 payment for a hip replacement. Right. The crazy part is you could probably buy that same hip replacement for cash from the same hospital for dramatically less. Let's just use$15 ,000 as the cash pay. So the point here is that any John Doe with a credit card can walk into the hospital and get a better price than the biggest insurance companies in the country have negotiated. But wait, there's more, right? For that price that they pay to the provider, they don't actually pay the negotiated price. So that hip transplant, that hip replacement might be$25 ,000 negotiated, but they'll say, okay, provider, we're only going to pay you$20 ,000.

30:35If you don't like it, sue us. And so now the provider is a subprime lender. They're getting underpaid versus the negotiated rate. They give preferential pricing to anybody just walking in off the street because the accumulated overhead associated with administering all the paperwork associated with that insurance company is dramatically higher. And then on top of that, there's the pre-off and the denials. Pre-offs and denials rarely are about actually denying treatment. What they're really about is the insurance company retaining the premiums for as long as possible to get the time value of money.

31:17And so in this day and age, they're making 4 % on the billions of dollars of premiums. Meanwhile, the hospital, the doctor from the hospital is spending 10, 20, 30 % of their time, depending on the specialty, dealing with a veterinarian who was put in charge of the pre-auth committee and is going to take 30 hours from that doctor, thereby impacting the ability of the hospital to turn through more patients and make more money and impacting the ability of the doctor to earn a living as well. And then all the things, the fax machines, the administrivia, because again, the insurance companies introduce all the administrative overhead.

31:59Now that doesn't mean the hospitals are harmless, we'll get to them. But when you take the subprime lending, the underpayment, the delay and the loss of the time value of money and the usage of the clinicians' time and nurses and everybody else, that's a lot of cost associated to the hospital, that if we're stripped out of the system, would mean either they'd make a lot more money or could lower prices. But to compensate for those losses, and feel free to correct me on any of this if your experiences are different, because I'm still learning all this stuff, right? But to compensate

32:34Jeremy Corr: for that - If you want, I'll add something. I think there's another part to it, which is that if you make the process so frustrating that at some point people stop wanting to invest the time, which I mean the providers, because they're not going to make any more money. And they're going to have to spend so much energy, so much frustration again and again, as you say, dealing with a clerk or dealing with someone who does the administrative. At the next time they think about ordering the CT scan, the MRI scan, doing the right but expensive procedure, They say, nah, it's just not worth it. I don't think that anyone does it intentionally, but I think psychologically - Yeah, because your time, you've got to value your time, right?

33:15You've got to value your time and your effort. And I'm the first to sit here and say, doctors are underpaid.

33:20Jeremy Corr: Let me ask you, I think you defined the problems well. We could spend hours talking about them because there's so many more than even the ones you touched on. Who, do you have any confidence that anyone is going to be able to unblock this logic. Unshittify it? Yeah, unshittify it. The government, the self-funded programs. Yes, I do. Companies like your own. Who's going to do it? So I'll tell you what my companies are doing, right? And I'm small in the big picture. So we said, look, the hospitals hate all this stuff, right? This is just more administrivia, more costs, more faxes to be sent. So we started going to hospitals and saying, We want your cash price in exchange for your cash price or some lower reference based price of Medicare.

34:07Right. So your cash price is what it is, but that's mostly MRI or low end services or, you know, basic stuff for your basic care stuff. It might even be a hip hip replacement. I don't know why I keep on saying transplant, a hip replacement. We want one hundred twenty to one hundred fifty percent. And for the more complicated inpatient things, you can charge us 250 % your corporate rate, but be advised that we're going to negotiate depending on the patient and the opportunity if there's other quality providers. And so we're going to providers and we're saying in exchange for that pricing, we're going to have no pre-offs, no denials.

34:46You'll waste zero time there. In addition, there'll be no deductibles from our plan members. We will cover all the deductibles. So you don't you don't turn into a subprime lender. You don't waste your doctor's time dealing with pre-auth committees. You get paid the same day. We'll even pay you early if you want want us to. And so we have started signing up. We've signed up nine thousand plus doctors across 200, give or take providers. And we created something called costpluswellness.com. And it isn't fully released. It's not fully baked yet. But all these contracts that we've signed that we're using for my employees, the employees love it because we go to the doctor and say, look, here's what we'll pay and everything.

35:32And nine out of 10 times, they're like, I'll take it because that's money right to my pocket. I don't have all the other Mishigas. Not everybody says yes, but most have. But here's the key part. On costpluswellness.com, and like I said, it's still just an alpha slash beta, we're publishing all those contracts. we're publishing it so that any employer can replicate exactly what we're doing and the beauty there is isn't that we might negotiate a great price we we're small we're not getting the best price but other larger employers can look at these and say well they can get that price and we have 10 times or 100 times more employees we can get a better price and negotiate that and slowly but surely that extracts the insurance companies.

36:14Because when you think about it, for the 160 million people that are covered by self-paying public or private companies or organizations, the insurance companies take no risk. And on Medicaid, the insurance companies take no risk. And on Medicare, particularly Medicare Advantage, they take minimal risk. They take some risk, but not all that much. And so that's, you know, and then even ACA plans that have CSRs, cost reductions, right? That's not even full risk. And so out of 300 million people that get insurance in this country, 100, you know, 280 million of them, basically, the insurance companies aren't taking full risk.

37:02Because if you think about healthcare, the economic side of it, There's only three questions What does it cost? How do you pay for it? And who takes on the financial risk for people who can't pay? And by what we're doing at Cost Plus Wellness We want people to see these contracts So they can replicate what we're doing And realize that with these contracts We're using a third-party administrator Who does all the claims management We're negotiating most of the pharmacy benefits ourselves With these pass-through PBMs that we work with, not the big PBMs, and our costs are dramatically lower. The only thing that's underemployed, if you will, or under implemented is we were because this is relatively new.

37:45There's a lot of parts across the country where we don't have providers. So we need to use wraparound networks that, you know, from the big insurance companies and they see us coming. Right. So we end up paying$18, give or take per member per month. And what i've been telling to people and i'll say to you as well is imagine if you could go to your hospital And i've said this to hospital ceos And you talk to your peers that run work at whatever administer hospitals and you created your own network of providers And you create and you published a contract That said not the charge master, which is just a crazy price But a real legitimate price that you publish with the contract that you make available to every corporate organization as part of this unwired network that you've created.

38:33If we're able to do that, you take away all the power of the big insurance companies. You take away all the power of the PBMs because that's really, you know, the lives covered and the networks they have. And then the third part where I will give them credit is they do have good apps and good care navigation between the different hospitals across the country that they have to integrate as part of the plans they offer. So they deserve credit there. But you could go to the big insurance companies, or let's just say the second tier of insurance companies, and say, we need somebody to do our claims.

39:10We need somebody to do an app and care navigation across our new unwired network and pay them purely on a fee-for-service basis. Then all of a sudden, the whole industry changes completely.

39:24Jeremy Corr: Let me stop and ask Jeremy to see if he has a question he'd like to ask. You often ask questions on behalf of small businesses and in terms of individuals. Jeremy, what's your question for Mark?

39:37Dr. Robert Pearl: Right. So like Robbie said, I'm the founder and owner of a small business that creates YouTube shows, podcasts, and does social media marketing for our clients. One of the things that concerns me about the current state of the country is the health insurance for self-employed people, entrepreneurs, small business owners. Many make too much money for the insurance they can find on the exchanges to be subsidized, and thus they're forced to purchase poor quality but expensive plans. Small businesses with only a handful of employees also struggle to afford it, if they even can, health insurance for employees.

40:10Dr. Robert Pearl: This can make them reluctant to grow and prevent a lot of talent from wanting to work with them, even if they do all that. It prevents the talent from sometimes going to the doctor and getting the care they need because they can't afford the deductible. And I worry about, you know, people who would otherwise be amazing entrepreneurs being too reluctant to branch out and try something due to the cost of this health insurance. And I wonder, you know, how many ideas or innovations in our country that we never see due to this? You know, Mark, you're an entrepreneur with a track record of innovation.

40:40Dr. Robert Pearl: What are your thoughts around these costs preventing people from becoming entrepreneurs? And do you have any ideas for innovation and health insurance for those who are self-employed or small businesses to help kind of encourage more people to become entrepreneurs like yourself? Yeah, it's a real challenge for small companies because you've gone out and looked at gotten prices from brokers. Right. And the brokers just keep on saying, hey, I'm saving you money versus everybody else. But the price of premiums and the deductibles are going up right now. There's not a great solution just to be candid.

41:09Um, if I were in your position, depending on how many content creators they have, you have, and what their families are about, I would probably try to go to a reinsurance company and say that, um, I want to get reinsurance at for$75 ,000 and make, um, and offer a program to all of our content creators. And what reinsurance is, it's kind of like catastrophic insurance that you pay a monthly premium to have available to you. And then I'd go to local hospitals, particularly if you're in a given geographic area. And I'd say to them, look, I've got these 10, 20, 30, 50 people in Dallas, Texas. Would you be willing to provide financing to them when the shit hits the fan?

42:01Right. They'll pay as best they can or I'll pay as best I can cash out of pocket for broken hands, MRIs, primary care, whatever it may be. But if there's something bad that we can't afford the deductible and we don't have insurance, would you put together a financing plan at a reasonable interest rate? And nine out of 10 times, those doctors and hospitals will say yes. And so going to them and bringing them a patient base is what I would do in that particular set of circumstances. Now, if you're around the country, you know, finding other podcasts or finding other small businesses where you can say, let's go together in this market or this market or these markets and try to find typically a smaller hospital.

42:45The big fancy hospitals are less likely to give you the time of day of that. But there's always the underperforming hospital, right, that still has good doctors, but doesn't charge as much. that's exactly where I would go because they don't like being overly reliant on the insurance companies to send them patients. They'd rather have other funnels of patients. And they'll initially tell you, yeah, just do your, you know, come in and put it on a credit card and do it that way. But I think they'll also negotiate with you because they're not going to just turn somebody away that needs, you know, you're not allowed to turn people away, but they will negotiate with you to help you pay.

43:23And that's a completely different approach. I'm sure you haven't seen that or heard or talk about it. And it's relatively new. But smaller markets, smaller hospitals, smaller providers, every doctor needs a flow of patients. They want to work with you.

43:41Jeremy Corr: So, Mark, we have had a lot of discussion across the past decades about the presidency of the United States. No, we don't need to go there. No, I want to ask about you. Some people have said you'd be great combining your entrepreneurial expertise with your business background, your ability to communicate. Let me solve healthcare first. Well, that's the question I have for you. Do you think that there is a big role for the government to play? I mean, half of our nation, or at least cost-wise, is funded by the government. half is done privately. You've talked a lot about the entrepreneurial side.

44:21Jeremy Corr: What about the role for the government elected officials? And what are the chances you think of them actually making the changes that you think would be helpful? So let's talk about the changes that I think would be helpful, right? Let's use Jeremy as an example. One of his podcasters is in a bad accident riding their bike, gets hit by a car, and they're transported to the hospital. And as it all plays out. Even though you've negotiated, asked for the best cash price, etc., it's$100 ,000. If Jeremy needed$100 ,000 to go to Stanford, the government would loan him some money and guarantee the rest of the loan.

44:57If Jeremy wanted an SBA loan and qualified, the government would give him some money and guarantee it through a bank. If Jeremy wanted a house, if it was his first house, the government would give him money for a down payment up to$25 ,000, depending on the city, and help guarantee his mortgage in many cases. Jeremy getting in a bike accident and having$100 ,000 worth of surgery, good luck, Jeremy, we're giving you no help, right? Which makes no sense in so many levels. What I would do is say the US government will guarantee all for people who are underinsured, they'll guarantee the payment of the deductible to any provider or hospital that charges them, that charges Medicare rates to that patient, right?

45:41It can't pay up and you want the patient to shop. You want Jeremy, Jeremy, we're trying to keep you healthy and sane financially. You want Jeremy, if it's at all possible, to go to be a smart shopper and to be a consumer of medical services that he needs. But at the same time, in a country where 40 % of people have$400 or less, more often than not, people aren't going to be able to afford extreme medical emergencies. So what I would say is if setting certain parameters on pricing from that provider, and it might be in San Francisco, it might be 150 % of Medicare, just something that is fair and reasonable.

46:23And for doctors, it could be higher than Medicare as well. I'm not trying to negotiate that price right now, but the point is that by guaranteeing that deductible, then saying to the patient, Jeremy, what do you think about this? since you make$100 ,000 just for the easy numbers. We're on a sliding scale. We means test the repayment of the guarantee we just made. So we're going to charge you 6 % of your income annually until you pay it back or 10 years, whichever comes first, after which we'll write it off. That way, Jeremy's a smart consumer. You're looking for your best price because you know you're responsible at the end of the day.

47:05You're able to get the care that you need. The hospitals aren't subject to being a subprime lender and losing that money or having to give that care and hope they get the dish payments back. And the government then doesn't have to write checks like we see with the ACA premiums that go right to the big insurance companies and allow them after their 85 percent MLR medical loss ratio to keep that 15 to 20 percent. This means that it's only that dollars are only coming from taxpayers only when somebody truly needs the medical assistance. So it's 100 percent M.L.R., if you will, 100 percent actuarial, if you will, because it only comes into play when it's needed.

47:52And at the same play, the administrative costs for dealing with this would just be an extension, effectively, of Medicare. And so, excuse me, it'd just be an extension of Medicare. And so the administrative costs would be much lower. And that, particularly in rural areas where there's uncertainty, that would allow so many more hospitals to stay in business, doctors to retain their own practices and stay on their own without having to sell out. You know, you would have the big fancy hospitals complaining that it's Medicare rates. They don't have to participate. You know if you don't want to participate don't participate and then once you figure all that out It becomes fair to the patients And it becomes fair to taxpayers and patients have an interest in maintaining their own health They have an interest in maintaining the economics of their decisions, right?

48:48So it's not like hey i'm going to go to the most expensive hospital and they're going to say yes And I only have to pay it back for 10 years It's I have to pay it back Right. And it's only going to be hospitals that have reasonable rates for the taxpayers to guarantee. So that's the approach that I would take to replace the ACA. And in that approach, you didn't hear me talk about insurance premiums at all.

49:11Jeremy Corr: Well, Mark, it's been a really great pleasure having you on the show today. I now fully understand what you did in the basketball world, what you did on the Shark Tank. How, as you said, you take ideas and principles in one area, apply them elsewhere, and you can just cut through the fog to get down to the heart of the matter. I think your ideas are amazing, particularly what you've done around the cost plus drugs. I think it's a radical change. We'll see whether our nation can fully embrace it. But I want to thank you for stimulating the ideas today. You've been an incredible guest for season 11.

49:44Jeremy Corr: I can't wait to see what you're going to do for the broader area of healthcare going forward.

49:50Dr. Robert Pearl: Reby, what do you think about what Mark said and where do you disagree?

49:53Jeremy Corr: Jeremy, I loved his innovative and entrepreneurial spirit. He recognized the massive inefficiency that exists in medical care today, but he also could admit... Let me start that again. Hold on a second. Jeremy, I loved his innovative and entrepreneurial spirit. He recognized the massive inefficiencies in healthcare today, but he also could admit where he didn't have expertise. As we've discussed on this podcast, medicine is ultra-stable. It will require someone with a different way of viewing the problem and opportunities that exist for major change, for things to be different. His ideas of making medical care more affordable for payers and patients.

50:43Jeremy Corr: They were exciting, although the proposal needs to be expanded significantly before they can become broadly actionable. I don't have major areas of disagreement with the problems Mark highlighted, but I would hope that in the future he will expand his ideas beyond the payment shortcomings of today and include ones relative to actual care delivery. As long as the medical care that's provided is inefficient, poorly coordinated, and technologically limited, costs will remain high. His approach of leveraging, negotiating power, that will be positive, but the big opportunities, they're going to happen when the care that clinicians provide becomes more efficient and effective.

51:30Jeremy Corr: Although it's true that cash-paying patients end up paying far less than what insurers do, that doesn't happen because they use cash. It's the reality that hospitals and doctors would rather have 50 cents on the dollar when they recognize that they'll never be able to get 100 % than holding out for the full price and getting nothing. But in a 4 % to 5 % margin business, you can't simply lower prices that much for everyone, or you go out of business. And that is why insurers and self-funded businesses, they need to look at the efficiency and effectiveness of the medical care their enrollees and their employees are receiving.

52:11Jeremy Corr: And when they do, Jeremy, I promise they'll find massive opportunities that, if implemented, will provide relief from today's ever more unaffordable medical prices.

52:25Dr. Robert Pearl: We hope you enjoyed this podcast and will tell your friends and colleagues about it. If you want more information on physician culture, you can find it at robertpearlmd.com. Please subscribe to Fixing Healthcare on Apple Podcasts, Spotify, or your favorite podcast app. If you like the show, please rate it five stars and leave a review. Visit our website at fixinghealthcarepodcast.com and follow us on LinkedIn, Facebook, and Twitter at FixingHCPodcast. Thank you for listening to Fixing Healthcare with Dr. Robert Pearl and Jeremy Corr. Have a great day.

53:02Thank you.