The subject line on the email began with two words: “Cold pitch.” When Alex Oshmyansky hit send, he figured he’d never even get a reply from the recipient, Dallas billionaire Mark Cuban. After all, Cuban deletes most of the thousand or so emails he gets each day. And Oshmyansky’s message, like most of those that end up in Cuban’s trash folder, was asking for an investment—in a company called Osh’s Affordable Pharmaceuticals.
But to Oshmyansky’s surprise, the Dallas Mavericks owner and Shark Tank host replied. Cuban told Oshmyansky, a bespectacled 36-year-old with an MD from Duke University, that he was intrigued by the concept, which had already attracted $1 million in funding. Osh’s Affordable Pharmaceuticals was set up to buy generic drugs from their manufacturers and sell them directly to pharmacies, undercutting pricing for a few important medications by leapfrogging what Oshmyansky has called the “monopolistic middlemen in the supply chain.”
Cuban had even loftier ideas, which he hammered out with Oshmyansky through a weekly email exchange over the course of months. Oshmyansky, “didn’t sell me,” Cuban says by email. “I sold him on doing more and thinking bigger.” That thinking led to the quiet creation in May 2020 of the Mark Cuban Cost Plus Drug Company. Emerging publicly in January of this year, the Dallas-based venture’s goal is to buy, package, distribute, and someday even make low-cost versions of many expensive generic drugs while offering “radical transparency” about prices. And it wants to do that on a scale Oshmyansky thought would take him years to achieve.
Cost Plus has just one drug in its portfolio today, but its goal is to build a network of distribution and manufacturing sites around the country. The first is under construction in Dallas’s funky Deep Ellum neighborhood and plans to be up and running in 2022. By the end of the year, the company, for which Oshmyansky serves as CEO, wants to stamp its brand on one hundred different drugs. “The very grandiose long-term goal is to fundamentally change the way the pharmaceutical industry operates,” Oshmyansky says.
After pivoting from its original plans to act as a nonprofit, the company is now organized as a public-benefit corporation. That means it’s for-profit—the company plans to charge a standard, 15 percent markup on every drug it sells—but its social mission of improving public health is just as important as the bottom line. “I could make a fortune from this,” Cuban says. “But I won’t. I’ve got enough money. I’d rather f— up the drug industry in every way possible.”
Others have tried to disrupt the drug industry before without widespread success. If Cuban achieves his goal, it’ll be because of the simmering rage and immense brain power of the doctor turned CEO leading his effort.
Oshmyansky first started kicking around the idea of changing the way drugs are sold two years after Cuban’s Dallas Mavericks won the NBA championship in 2011. That it took so long to create a business based on his idea shows the complexity of the issue, as even a guy with Oshmyansky’s intellectual record had trouble wading through the murky pharmaceutical industry.
Growing up outside Denver with parents from Ukraine and Moldova, Oshmyansky started college on an accelerated track at age thirteen, studying to become a high-energy particle physicist before changing course around age sixteen. String theory, he decided, did not present enough real-world opportunity to help people. After less than a year on campus, he graduated from the University of Colorado in 2003, at age eighteen, with a bachelor’s degree in biochemistry. Four years later, he founded his first company. At the time, Oshmyansky was pursuing the second half of a joint MD-PhD degree—the MD from Duke, the PhD in philosophy and mathematics from the University of Oxford. But somehow, he carved out time to start a company selling door handles that dispensed hand sanitizer, which he marketed to hospitals. (It’s still in business and now called OpenClean Technologies, though Oshmyansky left the company in 2020.)
In 2013, a then 28-year-old Oshmyansky got his first deep distaste for the drug business. He was in his fourth year of residency at Johns Hopkins University, working with a pulmonologist who had two patients in need of a drug called bosentan, which treats pulmonary arterial hypertension. The need was urgent. But the drug is expensive—a single course of treatment can run $10,000. Neither patient could afford that, so they applied for assistance. While waiting for approval, both died. “I was mad about it for a long time,” Oshmyansky says.
Driven by that anger, Oshmyansky started drawing up plans to challenge the status quo of drug pricing. He didn’t get far—the industry is opaque, and step one was simply figuring out how all the players fit together so he could understand how to work around the worst pieces of the puzzle. Understanding the equation is no easy task, says Dr. Ashley Garling, a clinical assistant professor at the University of Texas at Austin College of Pharmacy. “There are so many fingers in the pie between the time that a medicine is actually created to the time that it gets to the pharmacy,” she says. “It goes through multiple channels, and each person is trying to get a piece.”
The companies involved tend to point those fingers at each other when assessing the blame for increasing drug costs. Drugmakers, for instance, set the “list” price for drugs (akin to a retail price), and they often argue that when they’re charging high prices, they’re doing so to recoup the high levels of investment they’ve made in research and development. That may or may not be entirely true, but drugmakers have also argued that their prices are driven even higher because of rebates and discounts offered along the supply chain.
A key part of that supply chain are pharmacy benefit managers, referred to in the industry as PBMs, companies that came to be in the 1960s with the simple purpose of processing insurance claims. These days, they’re much more ingrained, negotiating deals with drugmakers on behalf of insurance companies and other payers. Drugmakers often offer rebates or discounts to PBMs when they want the PBMs to recommend that insurance companies cover certain medicines. Critics of PBMs say these arrangements line PBMs’ pockets at the expense of the consumer. “They don’t really have an incentive to drive down prices for patients,” Garling says. Oshmyansky considers the rebates offered to PBMs to be “de facto bribes.” But the Pharmaceutical Care Management Association argues that its members—the pharmacy benefit managers—do work to drive down net drug costs by encouraging competition among different drugmakers as well as among different PBMs. The association said in a recent report that PBMs “helped reduce prescription drug costs for more than 266 million Americans in 2020, saving the payers who contract for their services and their covered enrollees 40 to 50 percent on their annual prescription drug costs.”
Oshmyansky also has drug wholesalers in his crosshairs at Cost Plus. Almost all the prescription drugs sold in pharmacies are brought to those pharmacies by wholesalers who buy drugs in bulk from drugmakers. Today, the three biggest wholesalers—McKesson, AmerisourceBergen, and Cardinal Health—control 90 percent of the U.S. market, according to the New York Times. Oshmyansky believes wholesalers use the power of that scale to mark up prices. He says individual wholesalers will often offer an annual rebate to any pharmacy that buys most of its drugs from one of them, incentivizing them to not pick and choose medications based on price alone. But the Healthcare Distribution Alliance, which represents wholesalers and others, says that wholesale drug distributors offer “one of the most sophisticated and efficient distribution systems in the world,” and because they bring drugs quickly and safely to market, they produce “$33–$53 billion in cost savings to the U.S. healthcare economy each year.”
Even with all the savings that companies along the supply chain insist they’re generating, there’s no question that rising prescription drug prices are a problem. Since 2014, drug prices have risen 33 percent. That’s faster than the price increase for any other medical good or service, according to an analysis by GoodRx, which tracks prescription prices and provides drug discounts, and it’s making it harder for Americans to afford drugs they need—if they can get those drugs at all. According to poll results released in 2020, more than a third of American adults say they or a household member were told within the past year that their insurance wouldn’t cover a drug their doctor had prescribed.
Those kinds of problems already had Oshmyansky upset when, in 2015, his anger hit full boil. That year, Martin Shkreli, the so-called “pharma bro” who was CEO of Turing Pharmaceuticals, made a very visible, very controversial increase to the price of Daraprim, a drug that fights parasitic infections. Shkreli jacked up the price of Daraprim by 5,000 percent, from $13.50 to $750 a pill, and smirked his way through interviews about the decision. Oshmyansky felt “a sense of righteous indignation” about that, he says. More angry than ever at the pharmaceutical industry, Oshmyansky dove back into figuring out how to chop up the drug-selling chain. That year, he drafted a business plan that led to his founding Osh’s Affordable Pharmaceuticals in 2018, before eventually emailing Mark Cuban and moving from Denver to Dallas in 2020.
The first drug on offer from the Mark Cuban Cost Plus Drug Company is called albendazole. It kills parasitic worms such as hookworms, which are problematic only in the poorest and most rural parts of the U.S. (One of the first studies of its kind in decades found hookworms in Lowndes County, Alabama, in 2017). A one-time treatment of two tablets of albendazole will rid your body of the parasites and the infection they cause when they latch onto the small intestine. But the average cash price is around $225 per tablet—or $450 for a single treatment.
Dr. Rojelio Mejia, a clinician who works for Harris County’s public health system, says that’s too steep a price for many of the low-income patients he’s worked with. Mejia, who is also an assistant professor of infectious diseases and tropical medicine at Baylor College of Medicine in Houston, says he’s seen patients get albendazole shipped from relatives in Mexico or go without it altogether. Mejia has even heard of patients opting for a much cheaper hookworm medicine that’s made for animals.
That’s exactly the kind of problem Oshmyansky wants Cost Plus to help solve. So earlier this year, the company found a manufacturer who could make the drug. It donated the first 10,000 pills to Mejia’s team as part of a partnership that’ll fund continued studies of hookworm cases in Alabama. Oshmyansky says he’s legally prohibited from discussing the exact price Cost Plus pays for albendazole. But he will say the drug can be purchased from a manufacturer for somewhere between $5 and $10 a pill. Add in distribution costs and tack on the standard 15-percent surcharge that Cuban’s discount venture plans to add to each drug it sells, and Oshmyansky says he can offer the drug at a wholesale price of $15 per pill. Cost Plus then recommends pharmacies mark that up a bit more and sell each pill for $20. That’s orders of magnitude less than the current average price for albendazole. The reason for the price difference, Oshmyansky insists, is because Cost Plus avoids the rebates and other discounts offered to middlemen in the supply chain that he believes lead to price markups.
Marking down the typical price of albendazole is one thing. To do the same thing one hundred times over, as Oshmyansky and Cuban intend, they’ll need to take on an industry with extremely deep pockets, while also dealing with the tangled web of partnerships and acquisitions that have made industry forces more powerful. UnitedHealth Group and Cigna, both insurers, respectively own OptumRx and Express Scripts, both PBMs. Another PBM, CVS Caremark, is owned by pharmacy CVS. Because it’s backed by Mark Cuban’s also-deep pockets, Cost Plus “will put some pressure on the major players,” Garling says. “However, they’re going to have the same issues with the big drug companies that other generic manufacturers would have. They will have lawsuits. They will have pay-to-delay tactics. That’s pretty common in the industry.”
The Mark Cuban Cost Plus Drug Company will not be the first to try messing with the powers that be in prescription-drug sales. It won’t even be the first company backed by a Texan to try. In 2018, Houston philanthropists Laura and John Arnold kicked $10 million toward Civica Rx, a nonprofit aiming to keep generic drug prices low. The company, by now a collaboration of more than fifty health systems, has produced upwards of fifty generic medicines to date. Civica is a hospital-born approach that prioritizes drugs based on the needs of its hospital partners and guarantees those partners a certain volume. Cost Plus is different. Its focus is on getting products directly to consumers through pharmacies. “What he’s doing goes beyond this albendazole donation,” Mejia says. “It strikes at something that could change the course of how we do medicine in the U.S.”
And Oshmyansky says that’s prompted some in the industry to try buying up his upstart company before it has really gotten off the ground. Though they haven’t named names of prospective suitors, both Oshmyansky and Cuban say they’ve shrugged off all advances. “We’re not selling out,” says Oshmyansky, who still works a Saturday night teleradiology shift, interpreting medical scans from his home in Dallas. “That is not something that’s going to happen.”