Concentration of spending and the Pareto effect

"Why are we paying $10,000 for a $30 drug?"

My guest this week is Pramod John, a former Silicon Valley tech entrepreneur who entered the healthcare space to tackle the largest economic problem in the country: skyrocketing healthcare costs. Pramod quickly realized that healthcare's dysfunction is actually not a technology problem - it is a deeply ingrained problem with economic incentives.

In this episode, we dive into the murky waters of Pharmacy Benefit Managers (PBMs) and why the traditional model is designed to drive up costs rather than lower them. We discuss the shocking statistics of drug spend (where 2% of people account for 55% of the costs), why FDA approval doesn't always mean a drug is effective (using the infamous Alzheimer's drug as an example), and the implications of recent fiduciary lawsuits like the one against J&J.

Pramod explains how we can bring common sense back to healthcare by treating drugs like any other consumer purchase. By utilizing an "open market" drug management model, he argues that we can effectively replace traditional PBMs with transparent transaction processing software - saving plans 30% to 50% without relying on restrictive formularies or rebate games. 

Tune in this week for a clear roadmap for how to actually fix the irrational economics of our healthcare system.

Thank you to our 2026 sponsors!

ParetoHealth: ParetoHealth empowers midsize employers with a long-term solution to reduce volatility and lower overall health benefits costs. Visit ParetoHealth.com to learn more.

Samaritan Fund: A program that connects those who need help to the support they need. We are proud to offer the Samaritan Fund Program. Visit SamaritanFundProgram.com to learn more.

Vālenz Health: We're Vālenz Health, your partner in improving health literacy, reducing plan spend, and delivering high-value healthcare. Visit ValenzHealth.com to learn more.

Imagine360: Imagine360 helps self-funded employers save on healthcare with smarter health plans. Cut expenses by 20-30% with custom solutions. Contact us today at Imagine360.com.

Chapters:

(00:00:00) Intro: Why We Talk About Cost Instead of Quality 

(00:02:42) From Silicon Valley & Defense Tech to McKesson 

(00:10:43) Why Healthcare is NOT a Technology Problem 

(00:15:53) Fiduciary Responsibility & The J&J Lawsuit 

(00:19:03) The Butter Knife vs. Pareto: The Math of Drug Spend 

(00:23:54) Building an "Open Market" Alternative to PBMs 

(00:29:40) Why Doctors Fly Blind on Drug Pricing & Formularies 

(00:35:42) FDA Approval vs. Real-World Efficacy 

(00:45:44) How to Actually Fix the Model: The Real-Time "Pause" 

(00:58:36) Why International Sourcing & PAPs Aren't the Fix 

(01:11:00) Replacing PBMs with Simple Transaction Software

Key Links for Social:

@SelfFunded on YouTube for video versions of the podcast and much more - https://www.youtube.com/@SelfFunded

Listen/watch on Spotify - https://open.spotify.com/show/1TjmrMrkIj0qSmlwAIevKA?si=068a389925474f02

Listen on Apple Podcasts - https://podcasts.apple.com/us/podcast/self-funded-with-spencer/id1566182286

Follow Spencer on LinkedIn - https://www.linkedin.com/in/spencer-smith-self-funded/

Follow Spencer on Instagram - https://www.instagram.com/selffundedwithspencer/