Cost Plus Drugs founder urges transparency, shows company's markup model to advisory council

Alexander Oshmyansky, founder of Cost Plus Drugs, told the Pharmacy Benefit Manager Monitoring Advisory Council on Sept. 22 that his company's model of publishing acquisition costs and charging a flat markup reduces prices dramatically for many generic and specialty drugs and offers a private-sector example of transparency.

"We reveal the cost that we purchase the drugs at," Oshmyansky said. He described Cost Plus Drugs' public price pages, a flat 15% markup on ingredient cost, a $5 pharmacist fee for mail-order and higher dispensing fees for retail pickup through the company's retail network. "You can go right now, costplusdrugs.com, and you will see for every single drug exactly what we paid for it," he said.

Oshmyansky told the council his firm's model sometimes produces steep reductions versus conventional market prices: he said some medicines that patients were paying thousands of dollars for through conventional channels are available through Cost Plus Drugs for tens of dollars. He said his company also operates a wholesale marketplace, a retail network called the Team Cuban card, a mail-order pharmacy and a manufacturing facility in Texas that produces sterile injectables.

Oshmyansky described how PBM practices, vertical consolidation and the use of offshore group purchasing organizations can obscure real net prices and produce large markups. "Moving on to vertical integration with these group purchasing organizations, and now they're actually starting their own pharmaceutical companies," he said, calling some of the industry structures "a shell game" that shifts money through multiple affiliates and fees.

He told the council the company works with smaller transparent PBMs and sells into employer and institutional channels through partners, but that large branded manufacturers remain difficult to engage because manufacturers fear losing formulary access if they depart from longstanding rebate-driven arrangements.

Council members asked about Cost Plus Drugs' pricing mechanics and partnerships. Oshmyansky said the Team Cuban card network includes roughly 20,000 participating pharmacies; retail prices use acquisition cost plus a $12 dispensing fee ($16 for cold-chain products) plus the 15% ingredient markup. He said the company is considering passing through actual shipping costs for mail order in the coming year.

Ending: Oshmyansky praised Louisiana's Act 474 reforms and urged regulators to watch for new fee structures and offshoring of services; he urged the state to require transparency of downstream service fees and group purchasing organizations to prevent new forms of opaque charges.