Latest / CareTalk: Healthcare. Unfiltered. / Why Healthcare Prices Are Like Fight Club w/ Mark Cuban, Co-Founder, Cost Plus Drugs

Transcript

Why Healthcare Prices Are Like Fight Club w/ Mark Cuban, Co-Founder, Cost Plus Drugs · CareTalk: Healthcare. Unfiltered.

• 0:00
  SPEAKER_00: Mark Cuban is an American original.
• 0:02
  SPEAKER_00: He became a billionaire in 1999 when he disrupted the broadcast industry and sold broadcast.com to Yahoo.
• 0:09
  SPEAKER_00: He achieved every kid's dream in 2000.
• 0:12
  SPEAKER_00: If he couldn't play for a professional sports team, he bought one when he bought the Dallas Mavericks and helped lead them to a championship in 2011.
• 0:20
  SPEAKER_00: He became a famous face as an entrepreneur, as an investor at on TV's Shark Tank, and honestly a hero to my kids and a lot of other budding entrepreneurs.
• 0:29
  SPEAKER_00: But today we're going to talk about how he's disrupting and taking on the$6 trillion healthcare market and particularly the excess margins.
• 0:44
  SPEAKER_00: Welcome to CareTalk, America's home for incisive debate on healthcare business and politics.
• 0:49
  SPEAKER_00: I'm John Driscoll, the chairman of the UConn Health System.
• 0:52
  SPEAKER_00: And Mark, welcome.
• 0:54
  SPEAKER_00: Thanks for having me, John.
• 0:55
  SPEAKER_00: I'm excited to be here.
• 0:58
  SPEAKER_00: Tell us maybe start a little bit, like after basketball and TV and digital, why what got you intrigued by healthcare?
• 1:08
  SPEAKER_01: You know, as an entrepreneur and somebody who likes to do disruptive things, I always look at industries that people don't like, where the biggest incumbents aren't their favorites to do business to, and they wish they had an alternative and starts from there.
• 1:24
  SPEAKER_01: And then I got a cold email from my co-founder, Dr.
• 1:26
  SPEAKER_01: Alex Oshmyansky, and he wanted to do a compounding manufacturing center for drugs that go on the FDA short supply list, things like pediatric cancers.
• 1:36
  SPEAKER_01: And you can't say no to helping little kids get their pediatric cancer medications.
• 1:41
  SPEAKER_01: And that led me to learn a lot more about how opaque the pharmaceutical side of the industry is.
• 1:47
  SPEAKER_01: And that led to cost plus drugs launching in January of 22.
• 1:51
  SPEAKER_00: I just remember that early discovery phase when you were talking to, I think I talked to you one or Sir Twice, you talked to a lot of my friends, and the patience and the care with which you got into the details of how our crazy healthcare system, but you could have gone after anything.
• 2:07
  SPEAKER_00: What intrigued you about going after drugs and drug margins and you know what's turned what right now is probably one out of every five healthcare dollars that that insures cover is now drugs?
• 2:19
  SPEAKER_01: It was a path of least resistance, to be candid.
• 2:22
  SPEAKER_01: Um, you know, nobody knew what the price of a medication was.
• 2:26
  SPEAKER_01: The stories um of hearing people at the pharmacy counters turning around and not being able to get their drugs or tragic.
• 2:33
  SPEAKER_01: And so when I looked, it was very self-evident that nobody knew not only the price, but the cost of a medication.
• 2:41
  SPEAKER_01: And nobody trusted trusted the economic side of pharmacy or medical.
• 2:46
  SPEAKER_01: And so it just made natural sense to me as an entrepreneur that if I showed my cost for a medication and I showed my markup and let it had it at 15%, not only would we be less expensive, but we would be trusted.
• 3:00
  SPEAKER_01: And that's the key that was missing.
• 3:02
  SPEAKER_01: People don't trust the economic side of their healthcare.
• 3:05
  SPEAKER_01: They trust their doctor, but they don't trust the bill that they're going to get or what it's going to cost.
• 3:10
  SPEAKER_01: And by, you know, having that ultimate transparency of cost and markup, that was unique, and that would allow us to not only be less expensive, but to be trusted, and that's what got us there.
• 3:21
  SPEAKER_00: And the vast majority of Americans assume that they're getting a fair price at the pharmacy.
• 3:27
  SPEAKER_00: What are they missing?
• 3:29
  SPEAKER_01: They're missing, you know, they trust their pharmacist and assume that the pharmacist is going to do the right thing for them.
• 3:35
  SPEAKER_01: What they're missing is there are these enormous conglomerates that dominate the economics of not just pharmacy, but all of healthcare.
• 3:44
  SPEAKER_01: And in pharmacy specific, they're called pharmacy benefit managers.
• 3:48
  SPEAKER_01: And they effectively control, you know, 85% of the formularies, which what determines what healthcare members, what drugs are available to them and at what price.
• 4:01
  SPEAKER_01: And with that control, they've been able to dominate the pharmacy market and really define pricing.
• 4:08
  SPEAKER_00: Well, and I think the other thing is that it's all done in the shadows.
• 4:11
  SPEAKER_00: You know, one of the amazing things that you've been able to do is really talk about true pricing.
• 4:17
  SPEAKER_00: I think the MD Anderson study recently said that you can, you know, that it can often cost$50 a copay for a generic prescription that they can people can get for$5 on the cost of pharmacy.
• 4:32
  SPEAKER_00: I mean, it was just mindscraft.
• 4:34
  SPEAKER_01: Yeah, it's crazy.
• 4:35
  SPEAKER_01: I mean, whether it's what Medicare spends on drugs, whether it's insurance companies.
• 4:40
  SPEAKER_01: I was just talking to an insurance company, and they literally don't know what their actual net price is because of all the rebates and fees.
• 4:49
  SPEAKER_01: And where the industry is really turned upside down when it comes to patients starts with distribution.
• 4:55
  SPEAKER_01: And if this is too much inside baseball, just tell me.
• 4:58
  SPEAKER_00: No, no, but roll on.
• 4:59
  SPEAKER_00: This is the you're you're talking to the right people.
• 5:02
  SPEAKER_01: So when for distribution of drugs to pharmacies, that's dominated by three companies.
• 5:08
  SPEAKER_01: And those three companies control more than 90% of the pharmaceutical transactions.
• 5:13
  SPEAKER_01: And effectively they buy from the um the manufacturers, inventory them, and then ship them to the um pharmacies.
• 5:22
  SPEAKER_01: Simple, right?
• 5:23
  SPEAKER_01: A typical Shark Tank episode.
• 5:25
  SPEAKER_01: Except these companies, they're so dominant, they do hundreds of billions of dollars in revenue each.
• 5:32
  SPEAKER_01: And you would think companies with that level of market dominance could go to the BMSs, the Pfizers, the Lilies, et cetera, and say, hey, we want the best price we can possibly get.
• 5:42
  SPEAKER_01: And if that's what you thought, you would be wrong.
• 5:45
  SPEAKER_01: Because believe it or not, when those companies, those huge distribution companies buy from those brands, they literally pay the list price.
• 5:54
  SPEAKER_01: And then if they pay within 30 days, I think it is, they get a 1.5% discount.
• 6:01
  SPEAKER_01: And then if they provide some data, they get another 3.5%.
• 6:04
  SPEAKER_01: So typically it's a 5% discount.
• 6:07
  SPEAKER_01: So for a drug that's retail price is$600, the biggest distributors in the world are paying$570.
• 6:16
  SPEAKER_01: That creates the problem because when they pay$570 for a$600 list price drug or you know,$950 for a$1,000 list price drug, that's the least amount that they can charge to a pharmacy.
• 6:30
  SPEAKER_01: And if that's the least the pharmacy can pay$570 in this example, someone comes in that's uninsured, they can't sell it for less than$570.
• 6:42
  SPEAKER_01: Somebody comes in in their deductible phase, they can't sell it for less than$570.
• 6:48
  SPEAKER_01: So that right there is what creates all the disconnect in the pricing for pharmacy.
• 6:55
  SPEAKER_01: Now the question becomes why are the brand manufacturers, you know, the Pfizers, the BMSs, et cetera, willing to do this?
• 7:03
  SPEAKER_01: Because they actually, in some cases, publish, but they have a net price that they actually receive.
• 7:10
  SPEAKER_01: And even though they sold that drug for$570, 5% discount, they received$570 initially, but then they're paying out rebates and fees to the pharmacy benefit managers, which makes their net price about$300.
• 7:27
  SPEAKER_01: Now, I went to them and I said, Well, if your net price is$300, why don't you just sell it for$310 to the distributor?
• 7:36
  SPEAKER_01: You would make more money.
• 7:37
  SPEAKER_01: And then the distributor could sell it for$340 to the pharmacy, and they would make more, the distributor would make more money than they were.
• 7:48
  SPEAKER_01: And now the pharmacy, having paid$340 instead of$570, can sell for$345 or$350 to the uninsured patient, which still may be too expensive, but at least gives them a chance.
• 8:00
  SPEAKER_01: Same with those in their deductible phase.
• 8:02
  SPEAKER_01: And so for the for the manufacturer, they would make more money, reach more patients, the patients would have better adherence, and everybody would be ahead.
• 8:12
  SPEAKER_01: And I asked them, why do you not do this?
• 8:14
  SPEAKER_01: And they said, multiple CEOs have said, because those big PBMs that control the formularies for 85% of insured people in this country, well, guess what?
• 8:26
  SPEAKER_01: They told us if we do that, they will diminish our positioning on their formularies.
• 8:31
  SPEAKER_01: So anybody who checks their own pharmacy benefit plan will see, you know, tier one is$5 copay for generics, and then it goes up from there.
• 8:39
  SPEAKER_01: If for a brand drug, the copay goes from$25 to$75 or$100, or goes turns into co-insurance, the sales to that manufacturer, particularly if it's across their entire portfolio, is going to drop dramatically.
• 8:56
  SPEAKER_01: And so that's the threat that the PBMs use.
• 8:59
  SPEAKER_01: And it's also the reason why costplusdrugs.com has pretty much every generic, but only a smattering of brand drugs because those same PBMs have told those same CEOs of the brand manufacturers, if you deal with cost plus drugs, we will do the same thing and diminish your positioning on the formulary.
• 9:19
  SPEAKER_01: Why would they do it for just a little upstart company like ours?
• 9:23
  SPEAKER_01: Because they know that if we show the net price and only mark it up 15%, that$300 drug selling for$345 is going to really disrupt their pricing with all these commercial entities, all these companies that are offering these plans to their members, to their employees and their families.
• 9:47
  SPEAKER_01: And so they basically have done all they could to lock us out.
• 9:51
  SPEAKER_01: But it's because of these PBMs and the insurance companies that they own or are owned by them that completely have destroyed the economics for patients across this country.
• 10:02
  SPEAKER_00: Well, and I and I think the other thing that that that that and I think you probably know this, but a lot of the insurance companies are have their hand in the pocket of the PBM margin.
• 10:13
  SPEAKER_00: So it's just codependent.
• 10:19
  SPEAKER_00: They're vertically integrated.
• 10:20
  SPEAKER_01: Yeah, they're vertically integrated.
• 10:23
  SPEAKER_00: And even when they're not, they all thought the rebates at point of sale where the rebate would flow down.
• 10:31
  SPEAKER_00: Allegedly, the insured people are paying for that rebate, right?
• 10:34
  SPEAKER_00: Because they're paying the insurers.
• 10:36
  SPEAKER_00: The employer, the employer.
• 10:37
  SPEAKER_01: Well, your sickest employees, your sickest people pay the rebates.
• 10:40
  SPEAKER_01: Because if there were no particular because no one was sick, there'd be no rebates.
• 10:45
  SPEAKER_00: And that is going into margin, which then they say is keeping their rates down when rates are going up.
• 10:51
  SPEAKER_01: I mean, it's sort of it's a It's obfuscation, right?
• 10:56
  SPEAKER_01: There's no transparency from their side.
• 10:58
  SPEAKER_01: You know, healthcare contracts are like Fight Club.
• 11:01
  SPEAKER_01: The number one rule of Fight Club is that you don't talk about fight club.
• 11:05
  SPEAKER_01: The number one rule of any healthcare contract is by law, by you know, um they have confidentiality agreements, you're not allowed to disclose anything.
• 11:17
  SPEAKER_00: Right.
• 11:17
  SPEAKER_00: Break break break fight club rules.
• 11:20
  SPEAKER_01: Exactly right.
• 11:21
  SPEAKER_01: 100%.
• 11:22
  SPEAKER_01: And so people don't know the information asymmetry with states, with big companies, they have nothing.
• 11:30
  SPEAKER_01: And we're talking about pharmacy.
• 11:32
  SPEAKER_01: It's even worse on the medical side.
• 11:34
  SPEAKER_01: You know, the spread that happens when somebody goes in for a hip replacement and your employer is contracted with a big insurance company.
• 11:43
  SPEAKER_01: You, you know, the contract, you might have access to the information that says that hip replacement is supposed to be$25,000, but that insurance company ain't paying the provider the full$25,000, right?
• 11:57
  SPEAKER_01: They're paying them whatever, making the spread, and you have no idea what it is because it's a trade secret to know what that employee, what that insurance company that you hired, by the way, that you hired to work for you, that's supposed to be acting in the fiduciary.
• 12:11
  SPEAKER_01: Yeah, they're supposed to be acting in your fiduciary interest.
• 12:14
  SPEAKER_00: They won't tell you.
• 12:17
  SPEAKER_00: So how does how does I I want to get back to the industry piece, but okay, a consumer is upset.
• 12:22
  SPEAKER_00: My mother's 92 years old, there's a bunch of drugs involved.
• 12:24
  SPEAKER_00: Like, how does she get access to to the the cost plus drugs if she's locked out of the insurance, if if they she can't get at it get at it through her Blue Cross Blue Shield plan in Massachusetts?
• 12:35
  SPEAKER_01: So we have a lot of people who are on Medicare Advantage in traditional Medicare plans because very often our pricing is less than their coinsurance.
• 12:44
  SPEAKER_01: And so what happened to make it work, you just go to costplusdrugs.com and the upper right hand side, you can add your account, you put in your credit card, you have it'll tell you where to tell your doctor to send the script because they can do it right from their EMR, right?
• 13:00
  SPEAKER_01: And they just send it right to Mark Cuban Cost Plus Drugs, and it's easy.
• 13:04
  SPEAKER_01: And then when the script is there, we'll send you an alert, hey, we received your prescription for um whatever it may be, right?
• 13:13
  SPEAKER_01: And then you go in there and it's just like any other e-commerce um event.
• 13:18
  SPEAKER_01: Now I know it's tough for a 92-year-old sometimes, so you may have to help her.
• 13:22
  SPEAKER_00: She's got three sons.
• 13:23
  SPEAKER_00: We could we could sign up.
• 13:24
  SPEAKER_01: You got people to help her.
• 13:25
  SPEAKER_01: And actually, we just upgraded the system so that um if there is a dependent who is managing it for somebody who's not capable of using it, that it'll work now.
• 13:35
  SPEAKER_01: And so you just put it in there for her, they'll ship it to her, and you can do a 30, 60, 90, 365-day supply, just depending on what the circumstances are and you know how much you want to save.
• 13:45
  SPEAKER_01: And that's it.
• 13:46
  SPEAKER_01: It's just gonna live forever.
• 13:47
  SPEAKER_00: We're gonna go with the longer version.
• 13:48
  SPEAKER_01: That's the whole idea, right?
• 13:50
  SPEAKER_01: That's the whole idea.
• 13:51
  SPEAKER_00: So, so, Mark, how does that compare?
• 13:54
  SPEAKER_00: How does Costplus Drugs compare to Good Rx or the cash cards?
• 13:58
  SPEAKER_00: There's a lot of in the generics world and the cash world, which you're playing in, there's a lot of confusing things for consumers.
• 14:06
  SPEAKER_00: Like, how do they how do how does a consumer think about it?
• 14:09
  SPEAKER_00: Here's the difference.
• 14:10
  SPEAKER_00: Here's the difference.
• 14:11
  SPEAKER_01: When you go to costplusdrugs.com, you see our price, and that price is available to everybody.
• 14:17
  SPEAKER_01: It doesn't matter who you are, it doesn't matter your circumstances, doesn't matter what city or state you're in, you get the same price.
• 14:24
  SPEAKER_01: Good or X and some of the other discount cards, they do deals with pharmacies and they say, you know what, if you offer a better price for this week, you're gonna get what we estimate to get X number of prescriptions, and you'll be able to retain those people, they'll keep on coming back.
• 14:40
  SPEAKER_01: So let's run a discount, um, which may or may not be as cheap as cost plus drugs, typically not.
• 14:46
  SPEAKER_01: Um, but that when people go look at use one of the discount cards, it'll appear to be a much better price because the CVS is lower than the Walgreens in one city, and the Walgreens is lower than the CVS in another city, and next week the price can be completely different.
• 15:01
  SPEAKER_01: And we're and then on top of that.
• 15:03
  SPEAKER_00: That's a that's a that is a really important point for consumers, is it literally can can change by location and by geography and by time.
• 15:13
  SPEAKER_00: And and and the confusion's kind of part of the point.
• 15:16
  SPEAKER_01: Right.
• 15:16
  SPEAKER_01: Oh, for sure.
• 15:17
  SPEAKER_01: Right.
• 15:18
  SPEAKER_01: And on top of that, they literally charge the um the pharmacy for sending them traffic.
• 15:23
  SPEAKER_01: It's kind of like you make it up in in toilet paper and cokes, you know.
• 15:27
  SPEAKER_01: And so the um, particularly the independent pharmacies hate it.
• 15:32
  SPEAKER_01: So, in response to that, we created what's called teamcubancard.com.
• 15:36
  SPEAKER_01: Teamcubancard.com, right?
• 15:39
  SPEAKER_01: Where if somebody doesn't want to wait for mail order from um costplusdrugs.com, you can go to Team CubanCard and we have 17,000 pharmacies that we work with.
• 15:49
  SPEAKER_01: Now, I'm gonna be honest with you, if it's a five or seven dollar drug, because we pay the pharmacy a$12 fill fee for their time and support, right?
• 15:57
  SPEAKER_01: We may be a little bit more expensive than mail order or um cost um good RX with charges the pharmacy, but for anything over$15, we're gonna be competitive and you can pick it up locally there.
• 16:10
  SPEAKER_01: So you just go to Team Cuban card, you look up the medication, you print out the same type of card, or you just have it on your phone.
• 16:17
  SPEAKER_01: You walk in, you tell the um doctor to send it to the Walgreens or to the Albertsons or whatever it is, and you walk in with the um your screen or you print it out, and you get the um cost plus type price.
• 16:30
  SPEAKER_00: Is is anyone, just to be really clear, is anyone offering true, transparent cost plus drugs to compete with you?
• 16:38
  SPEAKER_01: No.
• 16:39
  SPEAKER_01: We're still four years in, four and a half years in, the only company that publishes a price list, the only company that has the exact same price for everybody without any membership, without any upfront fees, without any after effects.
• 16:53
  SPEAKER_01: Yeah, none of that stuff at all.
• 16:55
  SPEAKER_01: The price you see is what you get plus shipping.
• 16:58
  SPEAKER_00: And I think you know, you we talk about a public benefit corporation.
• 17:02
  SPEAKER_00: When one out of three Americans don't fill their script often because they can't afford it, what you're doing is a true public service.
• 17:10
  SPEAKER_00: And and and at least today, are you still pretty much completely generics oriented or are you starting to build brands?
• 17:17
  SPEAKER_01: Go back to what I said before, right?
• 17:18
  SPEAKER_01: Because we're starting to build brands, but the manufacturers, the brand manufacturers are still telling us that the PBMs don't want them to work with us.
• 17:29
  SPEAKER_01: And that's an inhibitor for us.
• 17:30
  SPEAKER_01: That's a challenge.
• 17:31
  SPEAKER_01: But one by one, we're adding more, like we just added Eloquist for 345.
• 17:36
  SPEAKER_01: I was shocked at that.
• 17:37
  SPEAKER_01: That was yeah, we were happy about it.
• 17:39
  SPEAKER_01: Yeah, and so we were the yeah, we were able to work something out, they were awesome.
• 17:43
  SPEAKER_01: Um, and so BMS, we put that together, and it's$345.
• 17:48
  SPEAKER_00: Do you think cheaper?
• 17:50
  SPEAKER_00: Are you going to be able to kind of do breakthroughs, do you think, with the other brand manufacturers?
• 17:54
  SPEAKER_01: Slowly but surely, right?
• 17:55
  SPEAKER_01: You're starting to see more direct to consumer.
• 17:57
  SPEAKER_01: The GLP1's kind of started it.
• 17:59
  SPEAKER_01: And so, you know, you'll you'll see that.
• 18:02
  SPEAKER_01: And the whole reason for doing that is to get around the PBMs.
• 18:06
  SPEAKER_01: And so one by one, you know, and like with Eloquist, it goes generic in a year or two or whatever, you know, Zerelto's right behind it.
• 18:14
  SPEAKER_01: And so you'll see more of brands like that where within the next couple of years they'll be generic.
• 18:18
  SPEAKER_01: So why not work with Cos Plus?
• 18:20
  SPEAKER_01: But, you know, as we show them, like we did a deal with Zafluza from Genentech, which is a um um flu medication that you take when you feel the flu coming on.
• 18:31
  SPEAKER_01: And we did great with them.
• 18:32
  SPEAKER_01: We sold a ton, and so they were really impressed.
• 18:35
  SPEAKER_01: So I think, you know, as we get better and better results for the manufacturers, they'll be more open to it.
• 18:40
  SPEAKER_01: But they're still going to be terrified that if they work with us too much, that those PBMs are gonna diminish them on the formulary, in which case it could cost them hundreds of millions, if not a billion dollars.
• 18:51
  SPEAKER_00: There's been a lot of federal interest in reforming the PBMs, potentially splitting out specialty pharmacies from pharmacies, limiting the pharmacies, uh their ability to really restrict access to certain pharmacies, to remove some of the traditional tools that have almost metastased into, you know, sort of structural cost disadvantages for the consumer.
• 19:13
  SPEAKER_00: Do you think any of that PB, well, maybe ask a different question.
• 19:17
  SPEAKER_00: What would you like to see in terms of PBM reform from DC?
• 19:21
  SPEAKER_00: Because it's one of those rare areas where there's bipartisan support and interest.
• 19:27
  SPEAKER_01: So where the PBM reform mattered is where they were negatively impacting independent pharmacies, right?
• 19:36
  SPEAKER_01: Where they were, you know, someone buys that Eloquist or Zerelto and it costs the pharmacy$570, but rather than reimbursing them$570, they might reimburse them$550, or they may be$100 short for a GLP one.
• 19:52
  SPEAKER_01: And so that fixing that was the most critical problem.
• 19:56
  SPEAKER_01: And I'm and that's pretty much happening in multiple states.
• 20:00
  SPEAKER_01: And that goes hand in hand with not allowing them to steer to their own pharmacies and not allowing them to pay a premium to fill a prescription to their own pharmacies.
• 20:10
  SPEAKER_01: And so I'm I'm thrilled about that.
• 20:12
  SPEAKER_01: Beyond that, though, you have to realize that, and you mentioned it earlier, the um the PBMs, in one case, own the insurance company, or in the other case, is are owned by insurance companies, and culturally, they're all the same.
• 20:28
  SPEAKER_01: You know, just where you would see PBMs play games like do their rebates through um overseas companies so that they could hire they would have a company in Ireland negotiate rebates with the um the um brand manufacturer.
• 20:42
  SPEAKER_00: First of all, question why would an American company need a company in Ireland to hide their drugs?
• 20:49
  SPEAKER_01: Yeah, for taxes and to hide it, right?
• 20:51
  SPEAKER_01: To hide it.
• 20:52
  SPEAKER_01: And so what they would say is, well, we we're giving you all the rebates we get as the PBM.
• 20:58
  SPEAKER_01: What they wouldn't say is one of their subsidiary companies is doing the rebate negotiation and retaining 20% or more, right?
• 21:06
  SPEAKER_01: And by the letter of the contract, they're passing through from the PBM.
• 21:10
  SPEAKER_01: That tells you the culture of the organization.
• 21:14
  SPEAKER_01: That tells you the integrity of the organization.
• 21:16
  SPEAKER_01: That doesn't stick with just the PBM.
• 21:18
  SPEAKER_01: That goes up and down the chain.
• 21:20
  SPEAKER_01: You have um the biggest insurance conglomerates, or just call them conglomerates, with 2,700 subsidiaries,$160 billion in annual intercompany transfers.
• 21:33
  SPEAKER_01: That's insane.
• 21:35
  SPEAKER_01: They game the ACAs um through um by owning providers, and they charge themselves more so that they can gain the medical loss ratios.
• 21:46
  SPEAKER_00: You know, and it's just to remind people in the ACA, one of the reforms that was institutionalized is you have to pay out a certain amount to the providers.
• 21:55
  SPEAKER_00: But if you own both sides of it, if you own the provider,
• 22:00
  SPEAKER_01: Trevor Burrus, Jr.: And they're doing it with audits and denials now and with um spreads on medical procedures.
• 22:07
  SPEAKER_01: It's horrific.
• 22:10
  SPEAKER_00: There are some I remember Paul, the CEO of Blue Shield, was really an innovator and wanted to blow up.
• 22:17
  SPEAKER_00: I mean, he was about as blunt as you have been at times on blowing up the traditional relationship.
• 22:24
  SPEAKER_00: I believe you had ended up with a relationship with Blue Shield.
• 22:26
  SPEAKER_01: Yeah, we work with Paul and Blue Cross Blue Shield, but it wasn't turn out the way it was designed to be.
• 22:42
  SPEAKER_01: He wants to do it.
• 22:42
  SPEAKER_01: Paul's heart's in the right place.
• 22:50
  SPEAKER_01: He just hasn't been able to convince all of his shareholders or I guess stakeholders to do something.
• 22:55
  SPEAKER_00: I think it's a stakeholder problem, Mark.
• 22:57
  SPEAKER_00: But I do think that there are I don't I don't think the kairetsues, the con the complicated conglomerates, I I think that there's a moment when America may decide that it's time to break those up.
• 23:12
  SPEAKER_01: Oh yeah.
• 23:12
  SPEAKER_01: I mean you saw Josh Hawley and Elizabeth Warren work together to create the breakup big medicine bill, but you also saw the power of the lobbying, um, the fact that it's gotten no incremental sponsorship from anybody on either side, and it's pretty much dead in the water, unfortunately.
• 23:31
  SPEAKER_00: Now maybe take this a slightly different direction.
• 23:35
  SPEAKER_00: You've been a real advocate for the early adoption and distribution of AI in every business.
• 23:41
  SPEAKER_00: Where do you see the big impact?
• 23:43
  SPEAKER_00: What would be your advice for folks in healthcare about where to look for innovation in AI and where they should be spending their time and attention?
• 23:49
  SPEAKER_01: Well, it depends on where you sit in healthcare.
• 23:53
  SPEAKER_01: You know, are you a doctor?
• 23:54
  SPEAKER_01: Are you in operations at a hospital?
• 23:56
  SPEAKER_01: Are you in operations at an insurance company?
• 23:59
  SPEAKER_01: But the first thing to do is learn how to use it and become comfortable with it.
• 24:03
  SPEAKER_01: And I think the primary, the, the, the most popular use case is going to be all of us people asking medical questions.
• 24:12
  SPEAKER_01: I mean, I use it all, I use CLOD all the time, all day long, right?
• 24:16
  SPEAKER_01: Hey, this hurts or that hurts, or, you know, I've got shin splints, or I take this medication and that medication.
• 24:23
  SPEAKER_00: I know what you're talking about.
• 24:24
  SPEAKER_01: Right.
• 24:24
  SPEAKER_01: So you know what it's like, right?
• 24:25
  SPEAKER_01: There's always something.
• 24:26
  SPEAKER_01: And so, you know, like I had to take levothyroxin and I needed um iron supplements.
• 24:32
  SPEAKER_01: I had no idea that I shouldn't take them at the same time until I asked Clot.
• 24:36
  SPEAKER_01: And so that's the primary integration.
• 24:39
  SPEAKER_01: And that in turn means that um the doctors are going to have more educated, but maybe not more correct in their assumptions or their um their determinations from what they get from on from AI.
• 24:55
  SPEAKER_01: But so that's one.
• 24:56
  SPEAKER_01: The second part is in any organization, whether you're um a single practicing physician or a big hospital, something called agentic AI.
• 25:07
  SPEAKER_01: And agentic AI is just basically an intern that just you know can do things, you know, repetitive tasks over and over and over again.
• 25:16
  SPEAKER_00: And smarter.
• 25:18
  SPEAKER_01: Yeah, it's not always smarter, right?
• 25:20
  SPEAKER_01: The thing about like there's always every business, whether you're a doctor or a hospital, or you know, on Shark Tank, every business has a lot of things where the CEO or entrepreneur says, I need to, you know, dig in and get this information, but you just don't have enough time or manpower, and you, you know, it's hard to do.
• 25:38
  SPEAKER_01: That's exactly what agents are great for, to do all the detailed um Michigas, right, that otherwise you might not be able to do.
• 25:46
  SPEAKER_01: And then there's things like doing research.
• 25:48
  SPEAKER_01: You know, doctors need to do research, hospitals need to do research, you know, employers need to do research.
• 25:54
  SPEAKER_01: Its ability to go out and find information about people, places, things, scenarios is phenomenal.
• 26:00
  SPEAKER_01: So that's part two.
• 26:02
  SPEAKER_01: But to really get wholesale change, you need to understand how all the pieces work, what's going on, where it's going, and you know, if you are going to write software, how you can use it, because that's the most advanced capability.
• 26:18
  SPEAKER_01: And that takes time to learn how to do, and that's not necessarily easy.
• 26:21
  SPEAKER_01: And that's why you're hearing a lot about stories of companies that are trying to integrate AI, don't know how to do it, and aren't getting an ROI in terms of productivity, competitiveness, or cost reduction.
• 26:32
  SPEAKER_01: And so you need to either find somebody and, well, you need to find somebody and take the time to really learn as in-depth as you can.
• 26:41
  SPEAKER_01: It's almost like I've been in this tech industry for so long.
• 26:44
  SPEAKER_01: I remember the introductions of spreadsheets.
• 26:47
  SPEAKER_01: And when people, before spreadsheets, people would have calculators and pen and paper, and you'd say, what if?
• 26:53
  SPEAKER_01: and you'd tear up a piece of paper.
• 26:56
  SPEAKER_01: Yeah, Lotus 1, 2, 3, right?
• 26:57
  SPEAKER_01: I mean, I literally had to pay$500 to go get trained in Lotus 1, 2, 3 so I could sell it.
• 27:03
  SPEAKER_01: It was crazy.
• 27:04
  SPEAKER_01: So, in any event, but back then, people had to learn how to use all those formula formulas and how it all works together.
• 27:11
  SPEAKER_01: And it took time and was complicated.
• 27:13
  SPEAKER_01: The same thing with AI.
• 27:15
  SPEAKER_01: It's not more complicated, it's actually less complicated to learn because the reason it's less complicated is because you can go right to Clyde, which is what I use primarily, and I say, Clyde, I don't really understand this.
• 27:26
  SPEAKER_01: Can you put together, you know, can you summarize it for me?
• 27:30
  SPEAKER_01: You know, do it like I'm in sixth grade.
• 27:33
  SPEAKER_01: And it'll try to do it like you're in sixth grade.
• 27:35
  SPEAKER_01: And then you can say, Well, I need to learn more about this.
• 27:38
  SPEAKER_01: Can you put together, you know, a syllabus or courseware or a training guide for me?
• 27:43
  SPEAKER_01: And by the way, if you go into notebook LM, if you take all that into Notebook LM from Google Gemini, it'll turn it into a podcast so you can listen to it while you're working out.
• 27:52
  SPEAKER_00: It's amazing.
• 27:53
  SPEAKER_01: It is it's totally amazing, but you have to know these things, these things in order to benefit.
• 27:57
  SPEAKER_01: You're basically saying your vision for it in healthcare is it augmenting consumers and professionals and do your homework, get your reps in so you're prepared to actually for sure, because it is a tool like any other tool, but it's just more advanced than pretty much any tool you've ever seen.
• 28:17
  SPEAKER_00: So that would suggest that we we're gonna have to find other ways to reform healthcare.
• 28:21
  SPEAKER_00: One of the things that that that I was excited about was your relationship with Humana and Centerwell.
• 28:27
  SPEAKER_00: Can you talk a little bit about that?
• 28:28
  SPEAKER_00: It feels like having started as a direct-to-consumer generics only, you've started to crack the brand.
• 28:34
  SPEAKER_00: You start up, you've got a couple of partnerships, it looks like, with health plans.
• 28:38
  SPEAKER_00: You know, Mark Paul Markovich just reminded you that the CEO of Blue Shield of California is a true reformer.
• 28:44
  SPEAKER_00: But I was, I mean, Humana is sort of one of the big behemoths.
• 28:47
  SPEAKER_00: That was right.
• 28:48
  SPEAKER_01: Well, we're not working with we're not working with the insurance side.
• 28:51
  SPEAKER_01: So we're we're not working with the insurance side.
• 28:53
  SPEAKER_01: Working with Centerwell, who who is going to be a more of a commercial PBM.
• 28:57
  SPEAKER_01: So right now we have a great relationship with HealthDine slash Well Dine out of Florida.
• 29:02
  SPEAKER_01: You know, they do a lot of our shipping and and um pharmacy work for us.
• 29:07
  SPEAKER_01: You know, they've scaled with us, but we plan on scaling a lot bigger.
• 29:11
  SPEAKER_01: So we need it uh to be able to have disaster recovery, if you will, and to extend.
• 29:17
  SPEAKER_01: And we thought Centerwell Partners, which is owned by Humana, would be a great partner.
• 29:22
  SPEAKER_01: They've got some really sharp people.
• 29:24
  SPEAKER_01: Um Bethany, Alita, there's just some really, really good people there.
• 29:28
  SPEAKER_01: Um and so we're just it's an extension of our growth.
• 29:31
  SPEAKER_00: Crack that insurance company wall yet.
• 29:34
  SPEAKER_01: Well, we have just not them, right?
• 29:37
  SPEAKER_01: Got it.
• 29:37
  SPEAKER_01: So there's an insurance, there's um Nation Health, I forget the name of it, out of Wisconsin.
• 29:41
  SPEAKER_01: We're part of their network.
• 29:42
  SPEAKER_01: I just talked to another one today, we'll be part of their network.
• 29:46
  SPEAKER_01: So they're realizing that they can save a lot of money for their patients by adding cost plus drugs to their network.
• 29:51
  SPEAKER_01: And by the way, in the state of California, any employer, any insurance plan, because they they have SB 141, if you want to add us to your network, any willing provider, you're you're able to do that.
• 30:06
  SPEAKER_00: That's fascinating.
• 30:07
  SPEAKER_00: I that that's an interesting reform idea.
• 30:11
  SPEAKER_00: So if are there are there is is that a reform idea that we should encourage folks to push at a state level?
• 30:17
  SPEAKER_01: Yeah, I mean, there's a lot of things, but uh, I mean, I wouldn't any willing provider is great.
• 30:22
  SPEAKER_01: Um, forcing transparency is great, but if I was going to to list them, I would say number one, any cash buy for pharmacy or medical should be allowed, should be applied to your um deductible.
• 30:35
  SPEAKER_01: So that if you have coinsurance or something happened, you switch plans and it's not uh accessible to you, whatever it may be, you definitely want to be able to do that.
• 30:46
  SPEAKER_01: Um you want to be able to negotiate with providers, right?
• 30:51
  SPEAKER_01: In other words, you should employers, particularly on the medical side, but also on the pharmacy side, should be able to carve out um specific specific procedures, specific drugs like GOP1s, you know, um hip replacements, and work with vendors they're able to direct contract with and negotiate better pricing.
• 31:12
  SPEAKER_01: Don't you think that's the same?
• 31:12
  SPEAKER_00: So they have that right now though, as it through ERISA, wouldn't a self-insured employer be able to do that now?
• 31:17
  SPEAKER_00: They're just not doing it?
• 31:18
  SPEAKER_01: Not necessarily, no.
• 31:20
  SPEAKER_01: Not necessarily, because the contract, remember, you might have the right to ask for it, but there's a very there's a 99.99% chance that the insurance company that you're negotiating with or the PBM you're negotiating with knows their stuff a whole lot better than you do.
• 31:35
  SPEAKER_01: And then the third thing, yeah, the third thing I would say is on the medical side, the spread, we always talked about the spread between on the pharmacy side, which was the difference between what the PBM paid the pharmacy versus what they charged the employer, right?
• 31:51
  SPEAKER_01: And that was the the delta and that was margin for them.
• 31:54
  SPEAKER_01: Well, it's worse on the hospital side.
• 31:57
  SPEAKER_01: So your insurance company, um, if you're self-insured that you hired to be a transaction processor, a third-party administrator, right?
• 32:06
  SPEAKER_01: They've negotiated with the network prices for a hip replacement and everything else.
• 32:11
  SPEAKER_01: But what you don't know and what they refuse to tell you is what they're actually paying that provider for that hip replacement.
• 32:20
  SPEAKER_01: For all you know, even though that you're getting charged$25K, which is after the$3K deductible for the um for the member, you they may be paying only$20,000 for that and keeping the$5,000 spread.
• 32:35
  SPEAKER_01: So what the state of Connecticut should be saying and other states as well is you cannot do spread pricing on medical procedures.
• 32:45
  SPEAKER_01: You have whatever it is that interests that's a great idea, whatever you pay the provider plus any fees, right?
• 32:52
  SPEAKER_01: Because the provider is going to then try to turn it into facilities fees, whatever else they they try to create, you've got whatever it is that goes out of pocket from the insurance company, the TPA or ASO in that case, to the provider is the most that you can charge the employer.
• 33:11
  SPEAKER_01: And the crazy part about this, John, is that it's the employer that hired the carrier, right?
• 33:19
  SPEAKER_01: And the carrier's taking no insurance risk.
• 33:21
  SPEAKER_01: All that risk, all the economic risk, is taken by the employer.
• 33:25
  SPEAKER_01: And they're cheating the pay the people who hired them.
• 33:28
  SPEAKER_00: So I was with I was with the the president, the CEO of Beth Israel Deaconess a couple of weeks ago, and he's a wonderful guy.
• 33:36
  SPEAKER_00: And after the Boston Marathon bombing, there were some of they had some people who who were terribly injured.
• 33:43
  SPEAKER_00: And the CEO of one of the employers called up the CEO of the hospital and and asked, Well, how much is this gonna cost?
• 33:52
  SPEAKER_00: And remember, the CEO of the hospital's and he and he he said, I don't know.
• 33:57
  SPEAKER_00: He said, I I know how I know how long the person has been here, I know what they've consumed, but I have no idea what we're gonna get paid, uh what you're gonna get charged, because every both sides wanted to protect the patient.
• 34:10
  unknown: Right.
• 34:11
  SPEAKER_00: And it was remarkable to me.
• 34:13
  SPEAKER_00: Neither the employer nor they had it on the hospital or the doctors had a clue.
• 34:18
  SPEAKER_01: I talked to a group of um hospital executives and I asked a simple question.
• 34:23
  SPEAKER_01: How many of you know what a bill of materials is?
• 34:26
  SPEAKER_01: And a bill of materials, if you're making a widget, right?
• 34:29
  SPEAKER_01: It's all the products that go in there and the cost and the number, right?
• 34:32
  SPEAKER_01: And so like 10% of people raise their hand and knew?
• 34:38
  SPEAKER_01: I'm like, if you don't know what your bill of materials is, how do you know what it costs for that hip replacement?
• 34:44
  SPEAKER_01: And if you don't know that, do you guys even do profitability by um insurance company?
• 34:51
  SPEAKER_01: You know, do you know if this plan or that plan?
• 34:53
  SPEAKER_01: Only a couple did, like 2% out of the 100 plus people that were there.
• 34:58
  SPEAKER_01: And so they just don't know.
• 35:00
  SPEAKER_01: They don't, they're not like I've tried at investing in some small to medium-sized hospitals.
• 35:05
  SPEAKER_01: And when I got in there and said, okay, what is this, this, that they didn't know.
• 35:10
  SPEAKER_01: You know, and they spent so much money on consultants.
• 35:13
  SPEAKER_01: They have revenue um cycle management, which is just about collecting the bills, because everybody tries to cheat everybody, and they'll give two to ten percent of their revenues away to these consulting companies, the RCM companies, when it it just should be simple.
• 35:31
  SPEAKER_00: It is just I'm I'm I chair one of those companies, the publicly traded company Query Star, and it's simply because everybody is trying to mask everything all the time.
• 35:41
  SPEAKER_00: And so you have to use advanced software even to determine.
• 35:44
  SPEAKER_01: And it's getting worse with AI, right?
• 35:45
  SPEAKER_01: So now they try to use probabilistic statistically based software to say, right, based off of everything we know and all the data sets we have, this is what you should be paying, right?
• 35:54
  SPEAKER_01: And then on the other side, if it's out of network, things like multiplanner whatever they call themselves now, they'll use that to basically overcharge.
• 36:04
  SPEAKER_00: It's the information war equivalent of trench warfare from the First World War, because everybody's lobbying stuff back and forth and no one can measure it.
• 36:12
  SPEAKER_00: Um nobody wins, you know, the war and all wars.
• 36:16
  SPEAKER_00: Uh but I I maybe we'll wrap though with the fact that you are winning and you are providing direct costs for folks like my 92-year-old mom, who is on a fixed income.
• 36:26
  SPEAKER_00: And you are starting to crack the code with the the large pharma folks and the insurers.
• 36:32
  SPEAKER_00: Maybe not as fast as as we we we we'd all like.
• 36:36
  SPEAKER_00: But I think you're laying out a future where people have at least a sense of exactly what they're paying for and what they're getting.
• 36:43
  SPEAKER_00: And so, Mark, really thank you for joining us today.
• 36:46
  SPEAKER_01: I enjoyed it, Johnny.
• 36:47
  SPEAKER_01: Great questions, really enjoyed it.
• 36:49
  SPEAKER_01: You obviously know your stuff, so it was it was it was fun to talk and discuss, and um hopefully we'll get to talk a whole lot more.
• 36:56
  SPEAKER_00: I I look forward to that.
• 36:57
  SPEAKER_00: Uh, with that, if you like what you heard or you didn't, we'd love you to subscribe on your favorite service.
• 37:03
  SPEAKER_00: I'm John Driscoll, the chairman of the UConn Health System and co host of CareTalk.