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Operations Management


HOW THE CEO OF MARK CUBAN COST PLUS DRUG CO. AIMS TO UPEND THE PBM MODEL 

Meet Alexander Oshmyansky, the physician Mark Cuban has partnered with to take
on the  
drug industry. 

Paul Barr, MS, MBA
April 28, 2023 4:15 pm


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W hen Alexander Oshmyansky, MD, PhD, pitched the idea of a not-for-profit drug
company that would undercut drugmakers’ excessively priced pharmaceuticals, he
was soundly rejected by potential backers, attracting no outside money. But on
the advice to try to create a for-profit company instead, and with the later
backing of Mark Cuban, things started to happen. Now, as founder and CEO of Mark
Cuban Cost Plus Drug Co., Oshmyansky says the effort is adding customers at both
the retail and wholesale level and the organization is planning to open its
first drug manufacturing facility in Dallas in June. Ahead of his keynote talk
at the HFMA Annual Conference June 28 in Nashville, Oshmyansky described how his
company is hoping to present clear and lower prices to compete with the dominant
pharmacy benefit managers and distributors.

Q: Could you tell me a little bit about yourself and how you found yourself
running this type of company? 

Oshmyansky: Sure. I’m a doctor, a radiologist by training, and I also have a PhD
in applied mathematics and theoretical physics. The story of how the company got
started goes back to 2015. Do you remember this character Martin Shkreli, the
“Pharma Bro?” He was kind of a social media villain-of-the-week type figure who
back then had dramatically increased the price of a generic product that he
bought the sole manufacturer of. I got upset about that. Some friends of mine
who were infectious-disease doctors did as well.  

We decided, very naively at the time, “Hey, let’s start up a nonprofit
pharmaceutical company; we’ll make the drugs, sell them at cost.” I went out for
the better part of three, four years trying to raise financing for that. And I
did not succeed. I failed spectacularly, didn’t raise a dime beyond what I put
in myself. I eventually got connected to a venture capital firm in Silicon
Valley that periodically donated to nonprofits called Y Combinator. 

Q: What did they do? 

Oshmyansky: They essentially said, “Hey, we like what you’re doing. We’d like to
support it, but we don’t think you’ll be able to raise enough money to get it
off the ground as a nonprofit. If you reincorporate as a so-called public
benefit corporation or for-profit company, but with a stated public mission,
we’ll invest in you like we would in any other company.” And to their credit
they were right; I was able to raise a small seed-financing round after working
with them. 

A couple months after that, just on a whim, I emailed Mark Cuban at his public
Gmail address. And surprise, surprise, he actually read the emails and got back
to me in like a minute. He invested a small amount of money to start with, and
he became increasingly enthusiastic as time went on. 

Q: And what is his role? Is he actively involved in the company? 

Oshmyansky: He is. He’s functionally a full-time co-founder at this point. He’s
very involved in operational details. 

Q: And so how is this going to work? 

Oshmyansky: We’re building what I like to call a parallel supply chain to the
existing pharmaceutical system. We are building a manufacturing plant near
downtown Dallas that will be focused on making the drugs that nobody else wants
to make. Drugs we can’t source anywhere else — particularly shortage products,
and drugs that don’t have much of a profit margin on top of them.   

Pharmacy benefit managers pose the most competition to the Mark Cuban Cost Plus
Drug Co., said CEO Alexander Oshmyansky, MD.

And we’ll reveal publicly what our operating expenses are and set our prices
based on that, plus a small margin — 15% on top of that to keep us profitable
and sustainable, but not extortionate. It’s not enough to set up the
manufacturing, because wholesalers are not obligated to buy our products if
there’s not enough margin in it for them. Similarly, the big national pharmacy
chains and pharmacy benefit managers [PBMs] aren’t under any obligation to put
our product on their formulary. 

So we decided to build out all of that infrastructure ourselves. We are also a
registered pharmaceutical wholesaler with licenses in all 50 states. We use that
primarily to wholesale to ourselves, and we have our direct-to-consumer
mail-order pharmacy — which we’re by far best known for at this point — operated
in conjunction with our fulfillment vendor, True Pill. We’re even setting up
employee benefit solutions as bolt-on or add-on benefits for large employers.  

Q: Are drug wholesalers the most threatened by this type of company? 

Oshmyansky: I don’t think they’re thrilled because a lot of their business model
is based on markups on generics. But if people ask who I view as our primary
competition, it’s mostly the PBMs. They’re the ones that really make the most
money off of financial-engineering type plans, where they basically create a
bunch of intermediaries, subsidiary entities, and mark up the price a little bit
every step along the way, so no one really sees what happens. And at the end of
the day, a drug that costs literally $30 might wind up costing $3,000. That’s
not a hypothetical example. That’s a real one — Imatinib, the chemotherapy
product. The games that are played can be extraordinary, and it’s baffling that
it’s been allowed to come to pass. 

Q: What is the manufacturing setup? 

Oshmyansky: We’ve designed a facility to be able to pivot from making one drug
type to another very quickly in full CGMP [current good manufacturing
principles] and full FDA compliance. And the way we’ve done that is with the
latest in robotic and single-use disposable technology, which in principle
allows us to go from making one product type to another within four hours
instead of weeks for extensive cleaning validation. So the idea is whatever drug
is in shortage that given week, we can pivot to making that. So, if sodium
chloride saline solution has been in shortage for God knows how long now, we can
make that.   

Q: How would you sum up what you are trying to do? 

Oshmyansky: Our philosophy is we don’t sell pharmaceuticals. We sell trust.
We’re trying to be as open, as transparent as we can. Trust is a fragile thing,
and we work as hard as we can to keep it.  

--------------------------------------------------------------------------------


COST-EFFECTIVE HEALTH THEME OF HFMA ANNUAL CONFERENCE 

OF NOTE 
Expected to draw more than 3,000 participants, offering four strategy-focused
general sessions, more than 70 educational sessions and seven content tracks
over four days. 

CONTENT TRACKS 
Accounting and Finance, Data and Analytics, Leadership and Business Strategy,
Cost Effectiveness of Health, Innovation and Technology, Payment and Care
Delivery Models, Revenue Cycle 

KEYNOTE SPEAKERS 
Headliners 
Thomas Fisher, Jr., MD, MPH, University of Chicago Medical Center 
Alexander Oshmyansky, MD, PhD, Mark Cuban Cost Plus Drug Co. 
Scott Rouse, behavior analyst 

System CFOs 
Dennis Dahlen, FHFMA, CPA, Mayo Clinic 
Elizabeth Foshage, CPA, MAHCM, Ascension 
James Lee, FHFMA, FACHE, MultiCare Health System 
Susan K. Nelson, CPA, MedStar Health 
William B. Rutherford, HCA Healthcare 

Association CEOs 
Joseph J. Fifer, FHFMA, retiring, HFMA 
Ann Jordan, incoming, HFMA 
Richard J. Pollack, American Hospital Association 




About the Author

Paul Barr, MS, MBA

is a senior editor for HFMA, Downers Grove, Illinois.

See All Articles

Related Tags

 * Cost Effectiveness of Health
 * Pharmacy


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