The Debate Chamber at Harlan Crow’s Old Parkland Campus in Dallas was packed Wednesday with businesspeople from around the state, for good reason. It isn’t every day, after all, that a couple of billionaire members of the Texas Business Hall of Fame—Dallas entrepreneur Mark Cuban and philanthropist John Arnold, of Houston—take to a stage to bat around ideas for controlling runaway healthcare costs.

While advocating for different approaches to the problem, Cuban and Arnold seemed to agree that costs are high because healthcare is an ossified industry swayed by special interests, and that any effort at significant “reform” is likely to be slow going.

With North Texans in the audience ranging from Nicole Small, chief executive at Lyda Hill Philanthropies, to Doug Hawthorne, founding CEO emeritus at Texas Health Resources, attendees at the Hall of Fame’s Creators 2025 presentation heard a lot of straight talk about how the situation has become so dire.  

Cuban, whose online pharmacy, Mark Cuban Cost Plus Drug Company, set out in 2022 to disrupt the pharmaceutical industry, said that business leaders, for example, are as much to blame for out-of-control costs as the government. “It’s CEOs who are making the decisions for their self-insured companies that are enabling these things,” he said.

The focus of chief executives on allegedly more important things, as well as with their lack of education about healthcare, means companies are “getting ripped off” by big insurers and pharmacy benefit managers, or PBMs, adversely affecting tens of millions of employees and their families, Cuban said.

PBMs are the industry’s middlemen who manage prescription drug benefits for clients including health insurance companies. The irony is that the nation’s three largest PBMs—CVS Health, Optum Rx, and Express Scripts—are part of giant conglomerates that also own big health insurers, studies show. So, Cuban said he’d like to see the government “disintermediate” PBMs from insurers, curbing the temptation to keep prices high.

Elaine Agather of event sponsor JPMorganChase, far left, kicked off Creators 2025 by welcoming guests to Old Parkland’s Debate Chamber. [Photo: Grant Miller Photography]

A ‘Moneyball’ approach to philanthropy

During the hour-long discussion, which was moderated by Vivian Ho, the James A. Baker III Institute Chair in Health Economics at Rice University, Arnold had a slightly different take on the issue as co-founder—with his wife Laura—of the entrepreneurial-minded Arnold Ventures LLC. Sometimes described as practicing “Moneyball philanthropy,” the Arnolds’ Houston nonprofit applies research and analysis to foster systemic change in fields including education and healthcare.

The latter, which accounts for 18% of gross domestic product, is the country’s largest industry and highly regulated, Arnold pointed out, yet it “has almost every market failure you can imagine … and the cost is driving everything.”

While there’s no “silver bullet” for reform, he said, Arnold Ventures has been studying price caps, the downside of industry consolidation, and something called site-neutral payments. Those payments would eliminate the incentive for hospital systems to snap up doctor offices and clinics and effectively charge higher, hospital-grade rates for health services, potentially saving $150 billion over 10 years, he said.

“We have this market that is just a consolidation of giants,” Arnold said. “You have a handful of insurers, a handful of hospital systems, a handful of PBMs, and now doctors’ practices that are very concentrated. And many times, one of them has market power. So, there have to be price caps in this market. While there are benefits to scale—there are efficiencies to be gained—if that benefit goes solely to the owner of it through higher prices, that’s a huge problem.”

Rice University’s Vivian Ho moderated the conversation at Old Parkland about healthcare affordability featuring Cuban, center, and Arnold. [Photo: Grant Miller Photography]

The benefits of transparency and trust

Some states have set, or are beginning to consider, such caps, Arnold said, because “everybody is saying this market is so busted.” Cuban, who smiled and said he preferred to call caps “reference pricing,” added, “To me, the more important thing from a legislative perspective would be to try to [identify] actual costs. The only way to do all these things for a lot less money is through transparency, and not just on the pricing.”

Transparency is a key selling point for Cost Plus Drugs, which posts on its website its discounted costs and prices for the 2,500 prescription drugs it offers. The company buys direct from drug manufacturers, then sells to consumers for a 15% markup, a $5 pharmacy handling fee, and a $5 shipping fee.

“To truly understand how we’re going to change the healthcare side of the healthcare system, you have to know the costs,” Cuban said. “We learned that from Cost Plus Drugs, once we published our costs. The other tangential benefit is trust, because if you see our costs and you see our markup is 15%, you’ll say, ‘OK, I trust these people aren’t trying to take me to the cleaners.’ Let’s get as much published as we possibly can on the cost side and the price side and the actual contract details, because then people and companies can start making more informed decisions.”

Meantime, Cuban added, he’s been trying to help chief executives get smarter about their companies’ prescription-drug choices, with some success. Recently, for instance, Tyson Foods and Irving-based 7-Eleven signed deals with so-called pass-through PBMs. Those are more transparent PBMs that pass on pharmacy discounts and rebates directly to employees and plans, without retaining additional markups that could boost prescription drug prices.

Companies working with pass-through PBMs are “up to about 22 million lives now. If we get them up to 60 million lives, then that’s the tilting point,” Cuban said. “So, if you get the opportunity to work with a pass-through PBM, who will disintermediate all these things, take that path.”

‘Thanks! You got me a better deal!’

His educational efforts with CEOs are coming along “slowly but surely,” Cuban said after the program concluded. Then he described how the process typically unfolds.

“So, I come in and then they go to their consultant and say, ‘Mark said this.’ And then the consultant goes to the insurance company or PBM and says, ‘We’re looking at Cost Plus’s prices, and it sure appears that theirs are lower for a lot of things that you’re selling than what we’re getting. We also talked about this on the healthcare side. What are you going to do about it?’ And then they respond and they come back with a better deal. And then the CEO says, ‘Well, I got a better deal. It’s a hassle to change, the switching costs are high, but, thanks! You got me a better deal!’

“Then, I know that that we’re not seeing any announcements from these public companies and the insurance companies saying they’re losing money on their self-insured employers—which means they’re making it up somewhere else. So, the next time I’ll say, ‘Audit it.’ Whether it’s a one-, two-, or three-year term, I’ll say, ‘Go back through and audit your costs, and see if they let you do that.’ And then the question becomes, ‘Do you really trust them? If you don’t trust them, why not take another path?’

“And that’s kind of the way it works. Like anything else, we get some people who want to be the trendsetters and get out there. Other CEOs just don’t want to deal with it—it’s an annoyance. And then others are like, ‘OK, let’s just start the process.’ But, it’s not going to happen overnight.”

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