Mark Cuban Sounds Alarm on Healthcare Titans Being ‘Too Large to Care’: Could Breaking Them Up Be the Solution to the 3,200% Surge in Administrative Costs?

Key Takeaway

In 2022, Mark Cuban launched Cost Plus Drugs with the mission of making medications more accessible and affordable. His initiative has sparked an ongoing effort to lower healthcare expenses and challenge deeply rooted industry practices in the United States. As discussions around healthcare intensify and Affordable Care Act subsidies come to an end, Cuban has become increasingly vocal, particularly criticizing pharmacy benefit managers (PBMs) as hidden profit centers for health insurance companies and calling for significant reforms.

Understanding the High Cost of Healthcare

The reasons behind the steep price of healthcare are complex and multifaceted. The sector is subject to extensive regulation and requires highly trained professionals, leading to substantial salaries for hospital staff and significant investments in advanced medical technology. Despite these necessities, inefficiencies and excesses within the system have drawn scrutiny, especially regarding PBMs and hospital administration.

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Pharmacy benefit managers serve as intermediaries among pharmacies, insurers, patients, and drug manufacturers. Their central role allows them to negotiate prices, but also to profit significantly from the difference between what they pay and what they charge. PBMs are frequently accused of driving up costs for all parties involved.

Cost Plus Drugs, the company founded by Cuban, bypasses PBMs entirely by working directly with drug manufacturers and generic producers. By charging only the manufacturer's price plus a modest markup, their medications are often far less expensive than those distributed through traditional PBM channels.

Hospital administrators, while not a uniform group, are often seen as contributing to unnecessary overhead. In some cases, their numbers surpass those of medical practitioners, adding to the overall cost of care. Their responsibilities include managing insurance, billing, and compliance with government programs, but critics argue their main function is to extract additional revenue from the system.

This raises a critical question: Why not eliminate these layers of administration and pass the savings on to patients? Consumers may pay substantial monthly premiums, while hospitals allocate millions to administrative salaries—costs that ultimately inflate prices for everyone.

Streamlining Healthcare: Lessons from Veterinary Medicine

Rather than justifying higher prices through administrative expenses, hospitals could operate more efficiently by reducing the number of intermediaries, ultimately lowering costs for patients. The veterinary industry offers a successful example of this approach; by avoiding insurance billing complexities, veterinary clinics maintain lower overhead compared to human healthcare providers.

Administrative Growth Far Outpaces Physicians: How Serious Is the Issue?

Between 1970 and 2010, the number of administrative roles in healthcare expanded by 3,200%, while the growth in physician positions was much more modest. This disparity has only widened over time.

Data from the Bureau of Labor Statistics projects that administrative jobs in healthcare will increase by 23% annually from 2024 to 2034. In contrast, the overall growth rate for healthcare roles, including doctors and surgeons, is expected to be just 3%.

Data from BLS.gov, Graphic by Barchart

Mark Cuban’s Perspective

Mark Cuban has shared his thoughts on social media, offering a deeper analysis of the issue. He points out that insurance companies benefit from PBMs, which are often owned by the insurers themselves and serve as lucrative sources of profit. Cuban states, “I support PBM reform. But keep in mind, the largest PBMs are owned by the biggest insurance companies. They use PBMs as cash cows. If regulations change, they’ll simply shift profits elsewhere. These companies are too large to be concerned.”

As a solution, Cuban suggests, “The most effective fix is to require these companies to separate their insurance businesses from other assets. Otherwise, unless legislation anticipates every loophole, insurers will continue to find ways to profit—moving from rebates to fees, and adding hidden charges wherever possible. PBMs are not independent entities.”

Investment Insights: The Squeeze on Healthcare Middlemen

From an investor’s standpoint, the “Cuban Effect” poses a significant challenge to the high-profit margins of the Healthcare Services sector. For years, major players like CVS Health and UnitedHealth have relied on PBMs to generate hidden profits through complex pricing structures.

With new transparency requirements set to take effect in 2026, these profit centers are under threat. The industry is shifting away from traditional PBM models toward approaches like Value-Based Care and Direct Primary Care. For investors, the message is clear: the explosive growth in administrative costs is unsustainable. As streamlined companies like Cost Plus Drugs expand, the excessive profits once enjoyed by middlemen are likely to be redirected to patients or eliminated through regulation.