20VC Mark Cuban on Reshaping the Pharmaceuticals Industry, How To Hire and Build Truly Great Teams and What Brand Really Means Today and How To Build One Successfully

In a dynamic conversation with Harry Stebbings on "20 VC," Mark Cuban discusses his latest venture, Mark Cuban's Cost Plus Drug Company, aimed at disrupting the pharmaceutical industry by offering transparently priced generic drugs at a 15% markup plus nominal fees, bypassing middlemen to deliver significant savings. Cuban, a serial entrepreneur and owner of the Dallas Mavericks, emphasizes the importance of hiring competent teams and aligning business goals with customer needs rather than profit maximization. He also touches on broader healthcare issues, the complexity of the industry, and his personal commitment to the project, having invested tens of millions of dollars without external investors. Cuban's approach is grounded in efficiency, customer advocacy, and a guerrilla marketing strategy that leverages price reductions and an expanding drug list to organically grow the customer base.

• Harry Stebings introduces Mark Cuban, a serial entrepreneur, investor, and owner of the Dallas Mavericks.
• Mark Cuban has started Mark Cuban's Cost Plus Drug Company to make expensive medications affordable.
• The company aims to remove middlemen, preventing price games, and offering significant drug savings.
• Mark Cuban’s past achievements include co-founding Broadcast.com and appearing on ABC's Shark Tank.

"Today I saw the news that Mark Cuban started Mark Cuban's cost plus drug company, essentially bringing a ton of medications that are really expensive and making them affordable."

The quote explains the purpose of Mark Cuban's new venture, which is to make expensive medications more affordable by starting a cost plus drug company.

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• Cost Plus Drugs aims to be transparent with generic drug costs, selling at a 15% markup plus handling and shipping fees.
• The pricing model often results in lower costs than what patients currently pay, even with insurance copays.
• Mark Cuban is financing the company himself without investors, focusing on being the lowest cost provider of generic drugs.

"The goal for us is to take generic drugs, be very transparent in what our costs and operation costs are, and sell everything at a 15% markup."

This quote describes the pricing strategy of Cost Plus Drugs, emphasizing transparency and a flat markup on generic drugs.

• The pharmaceutical industry is complex due to beneficial rules and regulations.
• Pharmacy benefit managers (PBMs) add complexity by acting as intermediaries, optimizing profits while appearing to minimize costs to patients.
• Cost Plus Drugs avoids dealing with insurance companies and PBMs, requiring direct payment from customers.

"Because there's so many rules and regulations... You get these things called pharmacy benefit managers that are in between patients and manufacturers and pharmacies and add a whole layer of complexity."

The quote explains the role of PBMs in the pharmaceutical industry and how they contribute to the complexity and high costs of drugs.

• Big Pharma may match prices or ignore Cost Plus Drugs depending on its customer base size.
• Cuban is prepared for fluctuations in revenue due to self-financing, unlike VC-backed or public companies.
• Cuban expects price matching from competitors in response to his company's pricing.

"If we have 10 million customers, they'll pay attention to us. If we have a million customers, maybe not."

This quote reflects Cuban's expectations of Big Pharma's response based on the scale of Cost Plus Drugs' customer base.

• Cuban's interest in healthcare began about four years ago amidst discussions on replacing the Affordable Care Act.
• Setting up a new age pharmacy involved understanding the industry and paying for studies to compare operating costs.

"I started working on healthcare issues probably four years ago... And I went through a bunch of things and got to understand the industry."

The quote reveals Cuban's motivation and the groundwork involved in starting a new age pharmacy like Cost Plus Drugs.

• Harry Stebings inquires about the significant price discrepancy in healthcare costs between Ontario and New York.
• Mark Cuban discusses his investigation into healthcare costs and the inspiration behind his venture into the pharmaceutical industry.
• A conversation with Dr. Ashmaiski Alex, a compound pharmacist and Cuban's partner, sparked the idea to address inflated drug prices.
• Cuban considered buying a drug's supply to counteract price gouging but realized it was illegal to give away drugs.

"Because in know, the province of Ontario covers a lot of the costs, but they still have to write a check to the hospitals to get the services done. And the hospitals charge them far lower than you're going to get the same service for in New York."

This quote explains the cost differences in healthcare services between Ontario and New York, highlighting government coverage and hospital charges as factors.

• Mark Cuban reflects on the origins of 'Cost Plus', a venture aimed at reducing drug prices and creating a sustainable business model.
• The idea was to purchase drugs and sell them at a reduced price, disrupting the market where prices were artificially inflated.
• Cuban mentions the legal complexities and the motivation to make a difference by providing affordable drugs.

"And that was 2017 or 18, I forget, and the rest is history. That's when we started cost plus."

This quote marks the beginning of Cuban's initiative to tackle high drug prices, setting the stage for the creation of 'Cost Plus'.

• Harry Stebings asks about the most challenging aspect of starting 'Cost Plus'.
• Mark Cuban identifies convincing others of the venture's legitimacy and following through as the primary challenge.
• Cuban emphasizes the complexity and cost of navigating regulations in the pharmaceutical industry.

"Getting people to believe that we would actually do it and follow through, because they get a lot of calls, because it's an obvious opportunity for entrepreneurs."

This quote addresses the skepticism Cuban faced when starting 'Cost Plus' and the need to establish trust and credibility in the market.

• Mark Cuban discusses the significant capital investment in 'Cost Plus', hinting at tens of millions of dollars without revealing exact figures.
• Regarding time allocation, Cuban stresses the importance of working with talented people to manage various business activities effectively.
• Cuban praises his partner, Dr. Ashmaiski, and the team for their expertise and efficiency in handling the pharmaceutical aspects of the business.

"It's not like, okay, I'm going to take $500,000 and let's just get this shit started. It's considerable. Tens of millions of dollars and growing."

This quote indicates the substantial financial commitment Cuban has made to 'Cost Plus', suggesting a serious and long-term investment.

• Harry Stebings admits difficulty in hiring and seeks advice from Mark Cuban.
• Cuban shares his hiring philosophy of "hire slow, fire fast" and the importance of promoting from within.
• He acknowledges past mistakes in hiring and now delegates hiring responsibilities to those more skilled in the process.

"The best line I've heard is hire slow, fire fast, where you've really got to take the time to dig in to understand."

This quote summarizes Cuban's approach to hiring, emphasizing careful selection and swift action when necessary.

• Mark Cuban describes his "trust but verify" approach, giving employees the opportunity to earn his trust through performance.
• He discusses the challenges of managing underperformance in a fluid job market, advocating for honesty and clear communication.
• Cuban categorizes employees as either stress creators or stress removers and prioritizes retaining the latter.

"Once you've earned my trust, then I'll turn things over. But it takes some time. You have to produce, and you have to show me that you can accomplish what you say you're going to accomplish."

This quote captures Cuban's trust-building process with employees, where proven ability leads to increased responsibility.

• Harry Stebings asks about balancing ambitious goals with achievable objectives.
• Mark Cuban shares his disdain for rigid business plans, favoring efficiency and optimization instead.
• Cuban's focus for 'Cost Plus' is not on maximizing revenue but on expanding the customer base and reducing drug prices.
• He emphasizes customer satisfaction and word-of-mouth marketing as key performance indicators for the business.

"We're not trying to optimize revenues. We're not trying to optimize profits. We're trying to optimize how many customers that we have, how many repeat customers can we get where they just give us their prescriptions because they trust us to lower our pricing every chance we get."

This quote outlines Cuban's goal for 'Cost Plus' to prioritize customer trust and service over traditional financial metrics.

• Mark Cuban's company aims to push drug pricing down.
• The pricing model is transparent: cost plus 15%, plus $3 labor, $5 shipping.
• New drugs are added to attract a new constituency of people needing those medications.
• The company's marketing strategy revolves around announcing new drugs and reducing prices.
• Lowering prices serves as a differentiating factor in the market.
• The company's core competency is providing low-cost drugs and continuously adding more options.
• Businesses should understand why customers choose them and leverage that knowledge for growth.

"So our marketing is going to be just twofold, announcing new drugs, because people know that with our transparent pricing, it's cost plus 15, plus $3 labor, $5 shipping, period. End of story."

This quote outlines the company's straightforward pricing model and its marketing strategy, which hinges on transparency and cost reduction to attract and retain customers.

"Because if every month, two months, three months, six months, year, whatever it takes for any given medication, because our volumes are increasing, our efficiency is increasing, whatever it may be, we're able to lower the price of that drug."

Mark Cuban explains that as the company's volume and efficiency increase, they can lower drug prices, which is contrary to the usual market trend of rising costs, thus creating a marketing advantage.

• The company is growing rapidly, adding 10,000 accounts daily.
• Partnering with Truepill allows the company to outsource and scale effectively.
• Truepill provides the necessary scale and meets the pricing requirements.
• Agility in the supply chain is crucial due to the potential for rapid changes.

"Yeah, very quickly. We're adding 10,000 accounts plus a day, and we're already past 50. And that's the value of having a great partner."

Mark Cuban highlights the rapid growth of the company and the importance of having a capable partner like Truepill to manage the scaling process.

• Scaling increases the challenge of dealing with manufacturers who may not have the capacity to meet demand.
• Recognition and visibility improve with scale, making it easier for potential customers to approach the company.

"What gets more challenging is dealing with the manufacturers, because not all might have the capacity."

This quote addresses the difficulties that arise with scaling, particularly in ensuring manufacturers can meet the increased demand for medications.

"If you're really hit scale and you're ubiquitous among your potential customers, that you don't have to tell them. They're asking you how to do business with you."

Mark Cuban discusses the benefits of scaling, where the company's presence becomes so widespread that marketing efforts become more about responding to customer inquiries.

• The interests of the insurance and provider industries are often not aligned with patients.
• The medical loss ratio requires insurance companies to spend a certain percentage on care, which incentivizes higher revenues.
• Hospitals and insurance companies benefit from higher revenues, which can be at the expense of patients.
• Administration costs in the U.S. healthcare system are high, comprising 21% of all healthcare costs.
• Mark Cuban prefers a hybrid healthcare system over Medicare for all or single-payer systems.
• He sees potential in technology, like blockchain, to improve insurance processes.

"Their interests are not aligned with patients. From pricing perspective, the insurance industry, there's this thing called medical loss ratio when you deal with Medicare, where you're supposed to spend 85% of your premiums on the care that is provided by providers."

Mark Cuban criticizes the misalignment of interests in the healthcare industry, specifically pointing out the medical loss ratio and its impact on insurance company profits.

"I'm more a fan of a hybrid system where lower income people get single payer and higher income people like me pay for what they use."

Cuban proposes a hybrid healthcare system as a more balanced approach, combining elements of single-payer and direct-pay models.

• Starting a business involves understanding the customer, the value proposition, and fulfillment.
• The key to success is assembling the right team to execute the business plan.
• Mark Cuban applies the same foundational principles to each new business venture.

"It's pretty much the same. Starting a business, what are we trying to accomplish? Who's our customer? Why would they deal with us?"

This quote reflects Mark Cuban's consistent approach to business, emphasizing the importance of clear objectives and understanding customer needs.

• Mark Cuban focuses on the near-term, looking at the next two years rather than five.
• He considers the availability of drugs coming off patent and the potential for inclusion.
• Cuban's past experiences with technology-driven businesses inform his approach to envisioning the future.

"I don't look forward five years. I look forward a know, I look forward two years maybe, in terms of what drugs are available or coming off a patent or that we can add."

Mark Cuban explains his short-term focus for planning the future of Cost Plus, emphasizing the importance of adapting to immediate opportunities and changes in the market.

• Mark Cuban respects healthcare workers but has issues with the system itself.
• He criticizes unnecessary spending on new buildings and real estate in healthcare.
• Cuban disputes the claims of healthcare costs and losses, calling them nonsensical.

"It's a shit show. You don't need building all these new buildings and buying all this real estate. And there's no lying about your cost to do something. We provide Medicare, we lose 89%. No, that's nonsense."

The quote expresses Cuban's frustration with the inefficiencies and dishonesty he perceives in the healthcare system's management of resources and finances.

• Mark Cuban discusses changing his mind after engaging with experts.
• He had a shift in opinion regarding Section 230 and algorithmic amplification.
• Cuban values the process of re-evaluating beliefs and learning from others.

"I went from saying, okay, algorithmic amplification should not be protected to, all right, they're probably know, as first amendment constitutional lawyers, they know their shit. And I didn't."

This quote reflects Cuban's willingness to reconsider his stance on legal protections for algorithmic amplification after discussing with First Amendment constitutional lawyers, highlighting the importance of being open to expert insights.

• Climate change is Cuban's foremost worry due to its potential impact on future generations.
• He approaches climate change from a probabilistic perspective.
• Cuban challenges climate change deniers by questioning the risk they are willing to accept.

"Are you willing to bet your kids future and your grandkids future and their grandkids future, something none of us truly know for certain."

Cuban uses this quote to emphasize the gravity of the potential risks associated with climate change and the responsibility to consider the long-term implications for future generations.

• Cuban wants his children to value learning, effort, and integrity.
• He shares sayings that encapsulate his philosophy on life and learning.
• Cuban believes in not cutting corners and the importance of effort.

"How you do anything is how you do everything. Meaning you can't cut corners, right. If you try to cut corners on the little things, that's how you're going to do the big things."

This quote conveys Cuban's belief that the approach one takes to small tasks reflects their approach to larger challenges, emphasizing the importance of consistency and integrity in all actions.

• Cuban's parenting style has evolved as his children have grown.
• He balances treating them as adults with being silly and available.
• Cuban and his wife have different roles in their children's lives, with his wife being the confidant and Cuban being the logical advisor.

"I try to treat them like adults, and I try to be a little bit silly at the same time. And I just try to be as available as I can."

The quote illustrates Cuban's approach to parenting, which involves a mix of maturity, humor, and availability to support his children's needs.

• Cuban believes in the importance of acknowledging his wife's perspective.
• He credits his wife's role in their happy marriage.
• Cuban appreciates the reduced stress from not worrying about past concerns.

"She's right."

Cuban succinctly attributes a key element of a successful partnership to respecting and affirming his wife's viewpoints.

• Cuban aspires to disrupt the healthcare industry, starting with generic drugs.
• He views this endeavor as a way to make a significant impact.

"Disrupt the healthcare industry, starting with generic drugs. To me, that's an impact."

This quote encapsulates Cuban's goal to create meaningful change in the healthcare sector by focusing on the affordability and accessibility of generic medications.

• Cuban values time as the most valuable asset.
• He acknowledges the environmental impact of his plane but tries to offset it.
• Cuban purchases carbon offsets to mitigate his carbon footprint.

"Time's the most valuable asset you don't own."

Cuban's quote reflects his belief that time is precious and irreplaceable, which justifies his investment in a plane despite the environmental concerns it raises.

• Cuban encourages people to try Cost Plus Drugs and provide feedback.
• He emphasizes the importance of learning from customer experiences.

"Cost plus costplusdrugs.com please everybody, go put in your prescriptions, let us know. Put on social media, reach out to us. I read it because I want to learn and we all want to get better at this."

Cuban uses this quote to promote his venture, Cost Plus Drugs, and to invite customers to engage and share their experiences to help improve the service.