“Brokers are supposed to place the role of trusted advisor, offering expertise in making benefits and healthcare decisions, but …………”
The Cost Plus CEO discussed how corporate leaders can take a hold of their healthcare spending at a Texas Business Hall of Fame event.
By Will Maddox | March 11, 2025
SOURCE: DM Magazine
In the wood-columned rotunda of Old Parkland’s debate chamber, Mark Cuban told CEOs to ask their pharmacy benefit manager if they can see their company’s claims data. “They will laugh at you,” he chuckled.
Even though healthcare expenditures are often companies’ second-highest expense after payroll, it can be difficult or impossible to obtain information about claims data or find out how the company’s money is being spent on healthcare and prescriptions. Asking a CEO or CFO to make a decision on a large corporate expense without data would be a ridiculous ask in nearly every business scenario–but in healthcare, much of the data is hidden.
Philanthropist John Arnold of Arnold Ventures joined Cuban for a conversation moderated by Baker Institute’s James A. Baker III Institute Chair in Health Economics Vivian Ho and hosted by the Texas Business Hall of Fame in the debate chamber of Old Parkland. The two speakers shared legislative priorities, reforms, and advice for how CEOs should think about healthcare. Cuban has experience as a CEO and running a pharmaceutical company, and he shared some advice he has learned by being on both sides of the healthcare spending equation. Below are three of Cuban’s pieces of key advice to corporate leaders.
Hire a Healthcare CEO
Cuban shared a familiar feeling for many CEOs or CFOs. Without the ability to dive directly into the healthcare spending of their company, most C-suite leaders depend on a broker to help them make healthcare spending decisions and choose an insurance plan. However, many insurance brokers are not incentivized to save the company money. Most are paid as a percentage of the premiums paid by their clients to the insurance company, meaning higher premiums paid by companies result in higher pay for the broker. Cuban described one pay package that sent a $7 commission to the broker for every prescription filled by the client, which is the opposite incentive for a CEO looking to spend less on healthcare.
Cuban shared this anecdote to highlight why CEOs need to pay more attention to their healthcare spending. “I used to use my guy, who was a world-class consultant, right? My guy would come in every year when we’re looking at our new plans, and say, ‘Look, their price is going up 7 percent, but I’m taking care of you. You’re only going up four percent.’ When we started Cost Plus Drugs, I started understanding the industry more, and I looked at the details of what my guy was offering me. For example, I looked at generic drug spending at the Mavs over an 18-month period, and we were charged $169,000. The price with Cost Plus was $19,000. Needless to say, he’s not my guy anymore. And that’s a challenge for CEOs right now.”
Brokers are supposed to place the role of trusted advisor, offering expertise in making benefits and healthcare decisions, but many of them are disincentivized from saving the company because of how their contracts are structured. Additionally, Cuban says that most C-suite leaders don’t have much expertise in one of the company’s most significant cost drivers and are passive enough to allow cost increases each year without investing in a solution. The solution? Hire a healthcare CEO with more influence and expertise than a chief human resources officer who can focus on healthcare expenditures, analyze the data, and control the firm’s healthcare spending. The Healthcare CEO can help in a couple of important ways.
Get Ahold of Your Data
Cuban talked about his attempts to analyze healthcare spending for Mavericks employees, and unless the company is one the biggest in the country, it doesn’t have its claims data. If a CEO wants to know if they should support covering GLP-1s and how it might impact overall spending, Cuban says it can be difficult to get the data needed to make a decision. He fought for six months and spent thousands of dollars trying to get claims data at the Mavericks to decide what the company should cover for its employees.
“Insurance companies and PBMS, they’re just like Fight Club,” Cuban says. “The number one rule of the healthcare contract is that you can’t talk about the healthcare contract.”
Most contracts prohibit the CEO from chatting with drug manufacturers about pricing or supply, and Cuban said the manufacturers don’t get the claims data on their end either. He spoke about how he spoke with an audiologist who told Cuban that they were seeing more patients coming in with hearing issues who took GLP-1s. Cuban said he would pass it along to the drug manufacturers because they likely had no idea how their medicines impacted healthcare spending and outcomes.
“They have no data available to them,” he says of the drug manufacturers. It will take CEOs of companies taking a more active role in their companies’ healthcare spending to make a difference. “There is so much control in the hands of CEOs that they just aren’t using.”
Avoid Big Pharmacies and PBMs
Cuban wasn’t trying to hide that he is biased in pushing CEOs to avoid big pharmacy chains when filling prescriptions, as Cost Plus is an online pharmacy and a manufacturer. But the proof is in the pudding. Because of the transparency of Cost Plus and its ability to source generic medicines while limiting profit margins, the company’s cash pay prices are often cheaper than the copay for other medicines.
Cuban says that Pharmacy Benefit Managers, which aggregate lives with the ostensible purpose of using efficiency of scale to negotiate drug prices and obtain medications for insurance plans, are much to blame for the increase in healthcare prices, as most of them are so large that they can exert pressure on both the manufacturer and payer to increase fees. CVS Caremark is one of the largest PBMs, which not only acts as the middleman between payers and manufacturers but also owns the pharmacy where the end users pay for and pick up their drugs (major insurer Aetna is also part of the same company).
Cuban recommends that, in addition to buying drugs at a cost-plus pharmacy like his, CEOs look to find a pass-through PBM, which passes all rebates, discounts, and fees it obtains through to the sponsor and employer. The pass-through PBM gets paid through a set rate of administrative fees rather than a changing rate based on rebates and discounts.
While still small, Cuban says that as these pass-through PBMs gain market share, they can make changes and force the large players to change their practices. “There are 24 or 25 pass-through PBMs, and all the things that I said were bad about PBMS, they don’t do,” Cuban says. “One by one, they’re adding clients, like 7-11 here in Dallas. Now they are up to about 22 million lives, and if we get them up to 60 million lives, then that’s the tilting point.”
Mark Cuban says “I used to use my guy, who was a world-class consultant…..” Does this mean he now uses a junior varsity second string consultant? Who was the former and who is the latter?
