“Their margin is my opportunity” – GeekWire
Amazon has built an e-commerce empire by cutting prices for customers, surviving for years on the simple promise of future profits for investors. So there was no small irony in Mark Cuban’s comment at the Code conference in Beverly Hills on Tuesday, when reporter Kara Swisher asked him about Amazon’s move into healthcare.
“I look at Amazon and say their margin is my opportunity,” Cuban said.
Cuban, from shark tank and Dallas Mavericks fame, referred to his company, Mark Cuban Cost Plus Drugs Co., which was launched earlier this year to bring low-cost generic prescription drugs directly to consumers.
The fundamental economics of its business model, which spares pharmacy benefits managers from negotiating wholesale prices directly with drugmakers, was central to Cuba’s appearance, opening what is billed as the last year of Swisher by hosting the signature conference she founded with Walt Mossberg.
But then Swisher lit Cuban’s competitive fires with some of his onstage jousting, prompting the serial entrepreneur to take a stand on Amazon’s proposed $3.9 billion acquisition of primary care provider One Medical.
“This is big business, and in healthcare, especially with drugs, it’s hard to be skinny and mean,” Cuban said. “And that’s what we are.”
Amazon has been in the pharmacy business for several years, starting with its $753 million acquisition of mail-order prescription company PillPack in 2018. The company launched its Amazon Pharmacy service in November 2020.
Cuban then addressed the subject of Amazon’s acquisition of One Medical: “As far as their entry into the services, I think it’s great. But you have to wear a different hat with Amazon, because they have so many employees that they can be their own customer, and it can be worth it.
That was Amazon’s approach with its Amazon Care primary healthcare services, which launched in 2019 as a pilot program for employees. Amazon Care extended to non-Amazon employees across the country last year, but Amazon recently announced plans to end the service, saying it couldn’t offer the right solution for business customers.
Across the healthcare industry, Cuban said the key for Amazon would be to bring transparency to the notoriously opaque US system.
“They will buy the companies to see what the real costs are, and I think they can do a better job because they can afford to take risks and do what they do,” he said. “They’re good at producing things that they bring in internally.”
Amazon’s own strength in cutting out the middleman is another hallmark the company could bring to health, as startup veteran Mike McSherry, CEO of Seattle-based digital health company Xealth, explained. in this previous GeekWire report analyzing the pending One Medical deal.
But ultimately, Cuban told Swisher, Amazon doesn’t have much to lose.
“If I had over 2 million employees and my cost of supporting those employees was $6 billion, and I could buy this company for $3 billion and reduce my operations enough that that worth it, everything else is gravy.” he said.
For the record, Cuban is rounding up his reference to Amazon’s employee base, which is actually closer to 1.5 million, but point taken.
This will no doubt be one of the topics that Swisher grills Amazon CEO Andy Jassy on during his Code conference appearance later.