Cold Open

SPEAKER_00 0:00

I am calm, I am prepared, and I am a professional. I'm gonna get through this whole rundown and I'm not gonna get derailed. And someone out there is gonna do something about this today. Yeah, I think I even believe it today. Alright, look at that net. One, two, three. Good morning. I'm Marcus Grant, and this is the comeback. Today we're covering the mattress firm economic anomaly. 4,000 locations. Not a single visible customer at any of them in a balance sheet. Well, that makes a lot more sense if you just stop asking questions. Hold on. What's this? Are you kidding me? My repill just got flagged. Prior authorization. That's insurance asking my doctor to prove I need the medication I've been on for the last six months. That's like asking a barber to prove you have hair every time you sit down. I knew I said I wouldn't do this, but we've covered this already. But new topic. I can show you exactly how this works. Buckle up, kiddos.

Morning

SPEAKER_00 1:07

Alright, I told you guys to buckle up, so hang on. Let me tell you about Martin Scarelli. Not because he matters, but because in 2015, this guy was the CEO of a pharmaceutical company called Turing. They bought the rights to a drug called Dereprim. It treats a parasitic infection that kills people with compromised immune systems. HIV patients, organ transplant patients, the kind of people that need it, the kind of people whose bodies can't fight back. The drug had been around for decades. It worked and it was cheap. Well, the Scarelli guy, he raised the price from $13.50 to $750 overnight. Same pill, same molecule, same factory. Nothing changed except the guy who owned the rights. Well, that's the first stone. That's the power stone. And that's exactly what the drug manufacturers do every day. Pfizer, Eli Lilly, Abby. They set the list price, and that list price is a fiction that the entire system treats as fact. Scarelli just skipped the press release. And then what did he do? He bought the only copy of a Wu-Tang clan album for two million dollars, a one-of-a-kind record in a handcrafted silver case. Because apparently price gouging the sick wasn't enough for this guy, and you needed the hobby. Well, one copy, one owner, he controls who hears it. That's the soul stone. And that's your PBM, the pharmacy benefit manager. He sits between you and the drug company. He's supposedly there to negotiate lower prices on your behalf. Except, yeah, this middleman gets paid more when your price goes up. One copy, one gatekeeper. Sound familiar? Yeah, my thoughts too. Well then, guess what? Mr. Genius, he just he tries to start an esports team and it failed to qualify. Here's where he gets really smart. He got convicted of securities fraud, told his investors his fund had 35 million when it had less than a thousand dollars, claimed a 35% return on an 8% 18% loss. Oh yeah, that's the reality stone. He rewrote the numbers on paper, and that's exactly how the rebate circle works. The drug company sets a fake high price so the PBM can negotiate a fake discount, so the insurer can charge you a real premium based on the fake price. Everyone in the chain gets a cut of the money that was made up to begin with. And guess what? While he was out on bail, what do you think this guy does? He posts a bounty on Facebook offering five grand for a strand of Hillary Clinton's hair, bollical included, of course. The judge calls it a solicitation of assault and revoked his bail on the spot. Straight to jail. That's the space stone. Destination? Behind bars. And that's your insurance company. They'll send you somewhere you didn't plan to go. You'll walk in thinking you're covered, and then they'll send you to collections. Seven years in prison, 64 million in fines, banned from the pharmaceutical industry, and he's still in court because he kept copies of the Wu Tang album after the government seized it. And then he was dumb enough to brag about it on a live stream. That's the timestone. He just keeps going back. I know, I've ruined the joke now, but he's not a CEO, he's a supervillain collecting infinity stones. Alright, so here's what really pisses me off. Every stone I just named, that's not one guy. That's the crew. The manufacturer sets the price. The PBM controls the gate. The insurer sends you where they want, and the pharmacist at the counter? They run your card, watch the computer say denied, and they shrug. They're not the villain, they're just the hostage they put at the front desk. Skrilly did all of it by himself, out loud, with a Wu-Tang clan album. The industry does the same thing quietly with lobbyists. We put him in prison. The system got a promotion. Last week I said, I'll tell you why your body is staple to someone else's spreadsheet. Well, here it is. World War II, FDR froze wages, so employers could not compete on salary. Everybody got the same. So they started throwing in benefits. Health insurance was one of them. The IRS made it tax exempt the next year. It was a temporary wartime fix. The war ended, well, the fix didn't. And over 84 years, that fix grew into the crew. Not a healthcare industry, an extraction crew, an industry with a heist plan. So where does the money go? House Oversight report, the biggest pharma companies spend more on stock buybacks and dividends than they spend on RD. The stock price beats your health every time. It's in the filings. The argument is, hey, we need these prices to fund innovation. But the receipts show the money goes to Wall Street, not the labs. And this isn't one party's fault. The receipts don't have a party. They have a return address, and the return address is a spreadsheet. Look at my coffee. Wow, Marco, really? The heist has been running so long they've forgotten how to spell my name. I'm gonna jump down this wormhole. Let me go check the receipts. I'll be back at noon with some better information.

Noon

SPEAKER_00 6:29

Okay, we're back. I've been in company filings, algorithm outputs, and the Enigma code since we went on break. Quite honestly, Enigma was easier. One question though. After World War II, the US ran Operation Paperclip. We recruited German scientists and brought them here. One group got us to the moon. The other, well, apparently they named their HMO Kaiser and gave us prior authorization. I'm Marcus with a K. Yeah um I need to look into that. So so here's where it starts. Your medication doesn't have a price. It has five. One, two, three, four, five. List price, rebate price, coupon price, insurance price, and my favorite whatever's left in your fucking checking account price when they deny it. It's Schrodinger's Tylenol. The price exists in five states until you open your wallet and then you collapse the wave function into bankruptcy. And here's why. The drug company sets the high list price on purpose. They kick back a rebate to the PBM. The PBM passes some of that to the insurer. The insurer adjusts your premium. You pay the premium. You also pay the copay, which is calculated off the list price, which was inflated to create the rebate in the first place. They made the price stupid on purpose so the discount could look generous. Everyone in the chain gets a cut, and the PBM, the middleman, they make more money when the price stays high. They're not negotiating for you, they're negotiating on you. Err. And you know what? This is what the defenders have to say. From a cost perspective, it makes perfect sense. Yeah, whatever, buddy. Remember that phrase, because we're gonna come back to it. Now here's the part. I know, I know, it's wrong, but here's the part that makes me want to commit a very specific and targeted act of violence against a very specific and namable industry. CVS, yep, the drugstore, owns CAREMARC, which is the PBM, and they own Aetna, which is the insurer. The same company negotiates the drug price, manages the benefit, and decides whether to cover it. So, in simplest terms, the referee, the scorekeeper, and the team owner are the same person, same paycheck. That's not a conflict of interest. This is ridiculous. That's a monopoly wearing three name tags. And then there's Humera. Fun fact best-selling drug in the history of man. $100 billion in cumulative revenue. AVI, how do they hold on to it? Filed 247 patents. Not 247 innovations. They just 247 versions of barbed wire with legal stationery. New cap on the syringe, patent it. Different angle for the needle? Patent. Slightly different protein concentration? Why not? Let's patent it. A patent ticket designed to prevent generic competition for as long as freaking possible, said Freakin. And it's not just Humera. Insulin. Same molecule. Patents expired decades ago. Price up 1200% since 1999. Explain that. Same playbook, different drug. And here's the bipartisan receipt from the whole thing. Open secrets data, health sector pack donations to federal candidates in the 2024 cycle. Total $52 million. Republicans got a little more, Democrats got a got a little less. Bottom line is both got paid. That's not ideology. That's a subscription to both channels. Now remember Joey? Yeah, Joey last week. Joey the guy with all the keys. Joey the protagonist. Yeah, well, this show's not about Joey. But he had joint pain, lost 20 pounds, couldn't walk, insurance approved Humara almost instantly. $72,000 a year for a disease he probably didn't have. No questions, no pushback. But the blood test that would have caught the whole real problem, $1,900. Denied. And now you know why. Every prescription runs through the PBM. Every prescription generates the rebate. The test, zero kickback, zero rebate. They didn't deny it because it was unnecessary. They denied it because it doesn't pay them back. And here's the part where I need to demonstrate something. We're all in on it. If you have a 401k, you probably have an index fund. You probably own United Health, CVS, Cygna, ABE. We're all funding the other team. Not because we choose to. Somebody bought it at 4 a.m. for us on a Friday running an algorithm. We were asleep. We had no idea. So what? I decoded Enigma during the break. I still can't read my own fund statement. The spreadsheet that supports the stock, the funds your retirement, that's the machine you're feeding every two weeks when payroll runs. There's an old saying, my dad loved it. Nothing's learned from the second kick of a mule. Well, we're on kick 47 and we're still not learning. We are not buying stock. Somebody already bought it. We are the product funding the spreadsheet that supports the stock that pays our own retirement. Joey got denied the $1,900 blood test. His 401k probably went up the same week. I did the math. I'm not going to tell you what number I got because I need to finish this episode without actually committing a crime. Just remember, somebody used my retirement account to buy United Health this week while I was asleep. If somebody's going to profit from Joey's denial, well, I love you, Joey, but might as well be me. Probably should be all of us. Because you know what? Being tired is the business model. So rebates that reward higher prices, PBMs that profit from the spreadsheet, three freaking companies owning every step of the pipeline, 247 patents on a syringe cap. They ban Medicare from negotiating. This is a ransom note, and they already have a hostage. And from a cost perspective, fuck you shit. The data stands through. The system isn't broken. It's working exactly as designed. To make money when you're sick. And then to make money even more money when you're too sick to fight back. The board behind me, you know what it needs? I don't know. A priest. I'll be back at six. At least I hope so if my prior authorization clears. Good evening. I'm Marcus Grant, and I'm still here. Look at this desk. I started this morning with a clean whiteboard and a full cup of coffee. Now I've got an ownership chart, a rebate circle, 247

Evening

SPEAKER_00 13:16

patent tally marks, and that cup of coffee still says Marku. Not even the coffee shop down the street believes in this show. Well at least we made it to six o'clock. The data's on the board, the receipts are piled. I look like hell. The plant looks better than I do. And now I owe you the part that matters. I've been talking about this like it's a heist movie all day. It's not. It's your life. Look, I'm not exempt from this, and neither are you. I don't know if pharma executives go home thinking I profited from suffering today. I don't know. I don't know the motive. Well, I probably do. It's money. I know they spent more on buybacks and cures. The motive is no longer speculation. It's money. The behavior is documented. 247 tally marks. I counted them. Over my shoulder. Each one is a wall between you and a generic. NIH funds the science. Pharma sends the invoice. They return $3 billion more to shareholders than they invested in cures. That's not speculation either. That's a filing. There used to be a simple way to price things. You made something for 11 cents, you added your costs, your overhead, your labor, you put a little on top for profit, and you sold it for a dollar. 900% markup. The guy makes money, the customer's happy, everybody still eats. That's cost plus pricing. Then pricing evolved. You stopped looking at your costs, you started looking at your competitor. If they charge $5, you charge $450. The customer still had options. The price is still tethered to something real. They called that competition-based pricing. Then came the third era. You stop looking at costs, you stop looking at your competitors. You simply look at the customer and ask yourself one question. What is this worth to them? And it turns out, staying alive, it is a very different price structure. The value of not dying is infinite. They know that, so the price can be whatever they want. That's value-based pricing. Specialty drugs cost more than a salary because hope doesn't have a price ceiling. In 1923, three scientists at the University of Toronto sold the insulin patent for one dollar each. They patented it on purpose, not to make money. They patented it because they were afraid somebody else would patent it and lock it behind a paywall. So they filed a patent and they gave it to the university for a dollar to make sure that that could never happen. The guy who discovered it, Frederick Banting, didn't even want his name on it. He thought it was unethical for a doctor to profit from something that keeps so many people alive. The story goes, he said insulin belongs to the world. Well, he died in a plane crash in 1941. He was 49. A hundred years later, three companies control 90% of the global insulin supply. Eli Lilly, Novo Nordisk, Sanify. The original patent expired decades ago. They don't need it. They made new ones. No one else is going to make this drug, so they do it. New formulations, new delivery systems, new patents on old science. The molecule didn't really change. The price went up 1200%. Eloquist costs over seven grand in the US, 900 in Canada, 650 in France. Same pill, same planet. People have died rationing it, skipping doses because they couldn't afford the refill, cutting the dosage in half and hoping the mouth works out. On a drug that was given away so that would never happen. When people ration medicine, the system calls it reduced utilization. When people die from it, the system calls it non-adherence. He gave it away for a dollar, and they took it back at 300 bucks a bile. A hundred years of progress turned we want everyone to live into we want everyone to pay. And the heist is still running. Scarelli was just the guy who did it loud. The rest, they do it quietly, with lobbyists and rebate structures, and 247 patents on a pen grip, and a system so complicated you can't figure it out. You can't figure out who's stealing from you because everyone's stealing from you. A little, all at once, constantly. Lobbying is the longest acting drug in America, and it never goes generic. Everyone agrees the system is broken. The profits disagree, and from a cost perspective, so here's what you can actually do. The middleman I've been talking about all day, the PBM, he's optional. There are doors that go around him. Cost plus drugs. Mark Cuban's company. They buy the drug, add 15%, and they ship it to your door. No PBM, no rebate, no spread, just the drug and what it costs. Over 2,000 medications. Costco Pharmacy. You don't even need a membership. Cash price, no insurance card. Walk in and ask. Lily Direct, Novo Care. The manufacturers are selling direct now because even they know the middleman is broken. Good RX, not a pharmacy. A price comparison. Punch in your drug, see what every pharmacy within 10 miles charges. There's four names. You can look up all four tonight. The system I just spent all day explaining, you can walk around it tomorrow morning. How fucked are we? Well, we're probably systematically fucked because we let medicine become a subscription service. Well, the good news is they found a cure. The bad news is they're holding it behind a paywall, it's a streaming service for not dying. Your body is in a market segment. The wrong drug costs more than the right test. Joey proves that. The system chose the expensive mistake of the cheap answer. Every time insulin rationing isn't a failure, it's the bill working. And when you can't afford the pills, you skip doses. You get sicker, and you end up in the ER. And that's where the next extraction starts. Next week, checking into the hotel we can't leave. One thing at a time. What's this? Your responsibility after insurance. 4,200. For what? Oh my god. How do I turn this thing off?