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Mark Cuban, an investor on Shark Tank and co-founder of Cost Plus Drugs, recently explained his company’s focus on low-profit margins at WIRED’s The Big Interview event on December 3, 2024. When asked why his company doesn’t prioritize higher profits, Cuban responded:
"How much f***ing money do I need? I’m not trying to land on Mars."
Mark Cuban emphasized that Cost Plus Drugs aims to provide affordable medications by adding a 15% markup to the base price. His focus is on disrupting the pharmaceutical industry and offering transparency, rather than maximizing profit. While the company could earn more, Cuban highlighted that accessibility and value for consumers remain the top priority.
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Shark Tank's Mark Cuban explains why cost plus drugs prioritizes low-profit margins
What is cost plus drugs?
Cost Plus Drugs is an online pharmacy that was co-founded by Mark Cuban and a radiologist named Alex Oshmyansky. The company, established in January 2022, has the objective of giving transparency to the pharmaceutical industry in reducing the cost of prescription drugs.
Cost Plus Drugs sells more than 2,300 prescription medications and delivers drugs directly to consumers.
It marks up the base price of drugs by 15% to make money off its costs. The company is somewhat different from other traditional pharmacies in its pricing practice. Often, pricing practices at pharmacies are much higher and less transparent.
The Shark Tank investor emphasized that while the company could generate more revenue, the focus is on offering medications at more affordable prices. He highlighted the company’s commitment to balancing business success with providing a public benefit.
This has made the cost-plus pricing structure of Cost Plus Drugs very affordable and transparent. The company marks up drugs by 15% to break even on the costs incurred in running the operations.
According to Cuban, such a pricing model helps the firm avoid inflated costs associated with the pharmaceutical industry, in which pricing is not straightforward to comprehend or explain to consumers.
Cuban provided an example of the medication Albendazole, which is used to treat ringworm. He highlighted that while other pharmacies charge approximately $113 for the drug, Cost Plus Drugs offers it for $35.
He explained that the company paid $26.08 for the medication, underscoring the significant savings that consumers can receive when purchasing from Cost Plus Drugs.
What is a public benefit corporation?
Cost Plus Drugs is a public benefit corporation or B Corporation. According to the Shark Tank investor, a benefit corporation is a for-profit organization that still tries to serve a public benefit.
Unlike nonprofits, which do not have the aim of making profits, a benefit corporation will generate revenues while trying to positively contribute to society.
Rick Bell from Harvard Business Services explained that benefit corporations balance profit with a commitment to a greater purpose, which is central to Cuban’s approach with Cost Plus Drugs.
The establishment of Cost Plus Drugs as a public benefit corporation by Cuban shows that he aims to have a positive influence on the pharmaceutical industry without sacrificing the viability of his business.
The Shark Tank investor stated that the company aims to decrease the cost of drugs for consumers so that medications are made accessible at affordable prices without neglecting the financial feasibility aspect.
The broader impact of Cost Plus Drugs
Cuban noted that the broader impact that Cost Plus Drugs has had on the pharmaceutical industry is the demonstration of how transparency and competitive pricing can lower the costs of prescription medications.
He added that research has shown that if Medicare were to purchase certain drugs from Cost Plus Drugs, the government could save billions of dollars. He said this was one example of the inefficiencies that existed within the current healthcare system.
The Shark Tank investor also underscored the success of the company’s transparent pricing approach, stating that Cost Plus Drugs has been lowering prices every weekday for 18 months.
He explained that the company publishes its entire price list, which is is difficult to obtain from traditional drug providers and that this transparency has resonated with consumers.
Stay tuned for the new episodes of Shark Tank air on ABC on Fridays at 8 PM ET. Don't miss out on Shark Tank—catch up with episodes streaming now on Hulu!
