Mark Cuban’s Problem with High Drug Prices and PBMs (Pharmacy Benefit Managers)

While it’s common to hear politicians, patients, and industry hawks villainize pharmaceutical companies for high drug prices, there is another middleman you may have never heard of: pharmacy benefit managers. Pharmacy benefit managers have an outsized influence on drug pricing. At yesterday’s Wall Street Journal “The Future of Health” event in Washington, D.C., PBMs took center stage as industry leaders debated their controversial role in the prescription drug supply chain.

The event’s keynote speaker was Mark Cuban. Cuban is a well-known entrepreneur, Shark Tank investor, and owner of the Dallas Mavericks basketball team. Most recently, Cuban is also the co-founder of Cost Plus Drugs, which provides generic drugs at lower costs. He is on a mission to revolutionize prescription drug affordability by eliminating the traditional pharmacy benefit manager middlemen and create radical pricing transparency. 

Cost Plus Drugs sells medications at manufacturer cost plus a flat 15% markup, $3 pharmacist fee, and $5 shipping. These prices are all displayed upfront before checkout. This transparent, direct-to-consumer model has slashed prices by up to 90% on hundreds of generic medications, saving patients millions of dollars.

On October 22, 2025, Cuban testified before the Senate to advocate for drug pricing reform and shine a light on how pharmacy benefits managers keep drug pricing hidden behind layers of complexity. 

What are pharmacy benefits managers?

Pharmacy benefits managers, also known as PBMs, are intermediary companies that act as the middleman in the pharmaceutical industry. PBMs are responsible for: 

• Managing health benefits for employers
• Negotiating discounts and rebates with drug companies
• Deciding which drugs get covered (generic, brand, and at what tier)
• Determining which pharmacies are “in network” 
• Requiring prior authorization for certain expensive medications
• Handling the claims transaction when you pick up your prescription at the pharmacy

In the 2000s, many insurance companies wanted to make “horizontal” acquisitions by buying their competitors to consolidate the market. These moves were blocked to prevent monopolies from being created. Between 2000 and 2018, many of the insurance companies went “vertical” instead, buying up multiple parts of the healthcare delivery chain. For example, CVS Health (insurance company) owns CVS Caremark (PBM), CVS Pharmacy (retail pharmacy), Aetna (insurance company), and MInuteClinic (walk-in clinics).

In fact, the majority of PBMs are owned by insurance companies, with the top three PBMS owning over 80% of the market.

Cuban noted that the self-dealing relationship causes: 

• Conflict of interest, where higher drug prices are advantageous to the PBMs or their insurance company owners.
• Lack of transparency, where complex pricing is intentionally hidden.
• Lack of a true free market, where big players prevent startups from entering the market to bring prices down.
• Formulary restrictions, where drug companies who aren’t willing to play by the PBM rules can have their drugs removed from formulary (insurance coverage) lists.
• No pass-through of savings, when drug manufacturers provide discounts or rebates, the PBMs keep the difference and don’t pass the savings on to patients.
• Hidden prices, where prices are intentionally hidden from employers and patients. 
• Higher drug prices for patients, where patient copays and deductibles are based on the drug’s list price, not the rebate or discounted price the PBM actually paid. Even if the PBM gets a significant discount, patients still pay high out-of-pocket costs.

How an Affordable Care Act incentive worsens rising costs

In addition to the above, the Affordable Care Act in 2010 allowed insurance companies to keep, at most, 15% to 20% of insurance premium revenue for administration and profit. This was called the Medical Loss Ratio rule. The rule was intended to limit the amount that could be provided to the insurance, but because it is a percentage of cost and not a flat fee, insurance companies benefit when healthcare costs go up. 

For example, if total healthcare costs were $100 million and the insurer keeps 15%, their profit would be $15 million. But if total healthcare costs were $200 million, the insurer keeps 15%, their profit would be $30 million. The incentives are not aligned to keep healthcare costs under control.

Finding a solution in net pricing

When asked what he believed the solution to be, Cuban’s strong suggestion was to only use net pricing.

Net pricing is the actual cost that was paid for the drug after all of the rebates, discounts, and fees are accounted for. If net pricing were used, it would: 

• Reveal the true cost of medications

• Lower out-of-pocket expenses for patient copays and deductibles

• Increase transparency and accountability in drug pricing

• Remove incentives for PBMs to favor expensive drugs just because they generate larger rebate dollars

Cuban concluded the event by sharing that the healthcare system in the United States has become virtually impossible to disrupt with the free market system because of the stronghold PBMs have on drug pricing. He called for change by all members of the industry to shine a light on this problem, which so profoundly affects our individual and national health.