Billionaire entrepreneur Mark Cuban says the problem with America’s prescription drug system is not just that prices are high. It is that the system is built so some of the most powerful middlemen benefit when prices stay that way.
In Senate testimony last fall, Cuban used a comparison familiar to millions of Americans: Amazon (AMZN). His Shark Tank companies, he said, often hate selling on Amazon, but they do it anyway because that is where the customers are – making it a necessity for any business.
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“My Shark Tank companies hate selling on Amazon, but most don’t have a choice,” Cuban said. “About 162 million Americans shop there, and if you want to reach them, you have to play by Amazon’s rules.”
He highlighted how unfair the entire scenario is, noting Amazon will take a cut of sellers’ revenue in exorbitant fees, force them to advertise, and even launch rip-off products of his companies’ original products to compete with them, if they see success.
How PBMs Control the Consumer Drug Market
Cuban argued that pharmacy benefit managers, or PBMs, occupy an even more powerful position in health care. More than 300 million Americans have some kind of coverage, he said, and every commercial, Medicare, or Medicaid plan hires a PBM to manage drug benefits. Three giant PBMs, all owned by major insurance companies, control pharmacy benefits for about 270 million Americans, according to his testimony.
That reach into the consumer market, Cuban said, is larger than Amazon’s. And in his telling, PBMs have built a system where the gatekeeper controls which drugs patients can realistically access.
The gatekeeping tool is the formulary: the list of drugs an insurance plan will cover. If a drug is left off the formulary, Cuban said, it is “basically invisible to patients.”
His central accusation is that PBMs do not operate like retailers pushing suppliers toward lower prices. Instead, he said, PBMs benefit from higher list prices because rebates and fees are tied to a drug’s Wholesale Acquisition Cost, or WAC.
“Here’s the kicker: unlike Amazon or Walmart, which want lower prices, PBMs actually prefer higher ones,” Cuban said.
Cuban described the process as an auction for access. Drug companies pay rebates and fees to get their products covered and prescribed. If they do not pay, he said, they risk losing access to patients. Because those payments are based on a percentage of the list price, a higher list price can mean more money for the PBM.
That dynamic matters because patients can be exposed to the inflated list price at the pharmacy counter. Cuban offered a hypothetical brand-name drug with a $600 list price, a 50% rebate, and another 10% in fees, leaving the manufacturer with $240 net.
Under that scenario, he said, an uninsured patient pays $600. An insured patient in an employer plan, ACA plan, Medicare Advantage plan, or Part D plan can also pay the full $600 until their deductible is met. Meanwhile, Cuban said, the PBM can still receive its rebate.
His argument is especially pointed for people with high deductibles. Cuban said PBMs and the insurance companies that own them “love high deductibles” because patients can pay full list price while the PBM still collects rebates. Insurers, he said, benefit when patients cannot afford to meet their deductibles because the carrier does not have to pay out from premiums.
“So patients end up paying the highest prices of anyone, all because PBMs insist on using inflated list prices instead of transparent net prices,” Cuban said.
Cuban also said the consequences ripple beyond patients. Wholesalers buy from manufacturers at the same list price, and because the major wholesalers use that same list price, he argued, there is “zero price competition.” Their fees, too, are based on WAC, which means they profit more when list prices rise.
Pharmacies are squeezed from the other side. Cuban said pharmacies may buy a drug from wholesalers at about a 5% discount, but when they fill a brand prescription for an insured patient, they are often reimbursed less than they paid.
“They literally lose money on most brand-name drugs,” Cuban said. “And if they don’t fill enough of those money-losing prescriptions, PBMs and wholesalers hit them with even more penalties. No wonder independent pharmacies are being crushed.”
Then came the line from Cuban that best captured the frustration of the testimony: “Make it make sense. It doesn’t.”
Cuban’s broader point was that the system’s incentives run in the wrong direction. Because the supply chain revolves around WAC, he said, PBMs, wholesalers, and insurers all have reasons to keep list prices rising. Patients, especially those paying out of pocket before meeting deductibles, are the ones who feel the price most directly.
He also spread responsibility beyond PBMs. Cuban said self-insured employers, states, and anyone contracting with the major PBMs are signing off on plans that force patients to pay list price, often without realizing how badly members are being harmed.
“We blame PBMs, but the real problem is the people and governments who keep signing these contracts without a clue,” Cuban said.
Cuban also criticized big brand pharmaceutical companies. He said they may dislike the major PBMs, but they have allowed themselves to be trapped in a formulary and WAC-based pricing system. If manufacturers moved to net pricing, he argued, patients’ out-of-pocket prices would fall immediately.
His testimony ended with a policy checklist: count all cash payments against deductibles; require patient out-of-pocket costs to be based only on net pricing, not WAC; separate formularies from PBMs; use administrative leverage to push manufacturers toward net prices and margins instead of list prices, rebates, and fees; and eliminate GCRs and DIRs.
For Cuban, the core issue is simple enough for anyone who has ever felt trapped by a marketplace they did not control. Amazon sellers may have to play by Amazon’s rules to reach customers. But in health care, he argued, patients are forced into an even bigger marketplace, where the rules can make the sickest people pay the most inflated prices.
Is Something Actually Being Done?
Since that testimony, there have been notable strides in this area. Mark Cuban’s recent partnership with President Trump to launch “TrumpRX,” a marketplace where Americans can compare drug prices across Amazon Pharmacy, Cost Plus Drugs, and GoodRx (GDRX), reflects the same push for transparency he called for in his Senate remarks.
The goal is simple: give patients a clearer view of what drugs actually cost, expose price differences that are often hidden inside the current system, and make it easier for Americans to choose the lowest available price before they get to the pharmacy counter.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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