The doctor lowering drug prices for 1 million patients, with help from Mark Cuban, Sam Altman — and Martin Shkreli

By Eleanor Laise

'I lost perspective on how many patients are getting ripped off': Dr. Alex Oshmyansky, CEO and founder of Mark Cuban Cost Plus Drug Co., has rattled Big Pharma and lands on the MarketWatch 50 list of the most influential people in markets

Kristopher Koeller relies on two daily medications to keep his blood pressure under control. They're both generics that have been on the market for decades -- the kind of drugs that should be cheap. But when Koeller, a tech consultant in Raleigh, N.C., was filling those prescriptions at a local pharmacy a couple of years ago, he had no insurance coverage, and the $80 total monthly cost was a blow to his budget. Koeller, 47, who also helps his mother pay for medications, food and other necessities, says he'd sometimes skip taking his blood-pressure drugs so that he could make ends meet -- even though he knew he was putting his health at risk.

Then Koeller heard about a new online pharmacy called Mark Cuban Cost Plus Drug Co., which offers a 90-day supply of his two blood-pressure drugs, amlodipine and losartan, for a total of about $16, or a little over $5 a month -- a 93% discount to what he'd been paying. With the drugs now much more affordable, Koeller said, he consistently takes them every day. And even though his employer now offers prescription-drug coverage, he said, he's still using Cost Plus Drugs because it's significantly cheaper than the cost through his employer's plan.

"I will always sing the praises of Mark Cuban," Koeller said of the online pharmacy. "It's saving my life."

While the name on Mark Cuban Cost Plus Drug Co.'s virtual door belongs to the billionaire Dallas Mavericks owner and "Shark Tank" star, there's a lesser-known figure who sparked its creation, steers its daily operations and "truly is a rocket scientist," Cuban told MarketWatch.

Dr. Alex Oshmyanksy, a would-be string theorist, former pineapple farmer and radiologist, conceived of the original idea behind Cost Plus Drugs and convinced Cuban to back and promote it, formally launching the online pharmacy just last year with zero marketing budget. Oshmyansky then led Cost Plus Drugs as CEO, positioning it to sign up more than 1 million customers, rattling the stocks of major drug makers and pharmacy benefit managers, and upending the pharmaceutical supply chain and the market for generic drugs. As a result, Oshmyansky lands on the MarketWatch 50 list of the most influential people in markets.

At age 38, Oshmyansky is no hard-charging corporate titan. He's actually hoping others will copy the Cost Plus Drugs business model, because he'd be "more than happy to go back to being a radiologist," Oshmyansky told MarketWatch. "If we can create change in the industry without doing it ourselves, absolutely that would be amazing. This stuff takes a lot of time and effort."

The core idea is simple: Focusing largely on generics, Cost Plus Drugs prices medications based on what it costs to buy them directly from the manufacturer, plus a 15% markup, $5 to cover pharmacy labor, and shipping. Middlemen, such as the pharmacy benefit managers who manage prescription-drug benefits on behalf of insurers, employers and other payers, are cut out of the picture. The model results in some Crazy Eddie--style price insanity: Fingolimod, a generic for the multiple sclerosis drug Gilenya, can cost about $13,000 at retail pharmacies, but Cost Plus Drugs sells it for $295 plus shipping. If Medicare purchased generic drugs at the prices available from Cost Plus Drugs, it could have saved $3.3 billion in a single year, according to a study by researchers at Harvard Medical School.

But Cost Plus Drugs isn't stopping there. This year, the company started working with brand-name drug manufacturers, including Johnson & Johnson (JNJ) and Pfizer Inc. (PFE), to offer a handful of products under the same model. In the past year, the company has also signed up some sizable health plans and launched the "Team Cuban Card," which lets customers pick up prescriptions at Cost Plus Drugs prices at grocery and independent pharmacies across the country. Now, the company is looking to sell drugs directly to hospitals and putting the finishing touches on a new manufacturing facility in Dallas, which will focus on producing drugs that are in shortage.

All this is prompting investors and industry analysts to have a hard think about the future of companies currently dominating the pharmaceutical supply chain. When Blue Shield of California said in August that it was dropping some CVS Health Corp. pharmacy benefit management services in favor of Cost Plus Drugs and Amazon.com Inc.'s (AMZN) Amazon Pharmacy, CVS's stock (CVS) plunged more than 8% in a single day. Shares of PBM competitor Cigna Group (CI) also got whacked. In June, after Cost Plus Drugs said it would offer Coherus BioSciences Inc.'s (CHRS) Yusimry -- a biosimilar for AbbVie Inc.'s blockbuster arthritis drug Humira -- at a 90% discount to Humira's list price, shares of AbbVie (ABBV) and Humira biosimilar maker Amgen Inc. (AMGN) hit 52-week lows.

Cost Plus Drugs isn't just cutting out the middlemen; it's setting up klieg lights that show all their warts. Price breakdowns on the Cost Plus Drugs website highlight each drug's cost from the manufacturer, plus the markup and fees. That level of clarity is brutal for prescription-drug middlemen, experts say, who have used fees, rebates, pharmacy clawbacks and other maneuvers to profit from an opaque system where no one seems to know the true price of a medicine.

Most doctors don't know the cost of the drugs they prescribe, and "what's worse is that most patients have no idea how much they will be charged for a new prescription drug until they try to pick it up from the pharmacy," said Dr. Hussain Lalani, a primary-care doctor, a Harvard health policy researcher and co-author of the study on Medicare's potential savings using Cost Plus Drugs prices. When patients do come face to face with prescription-drug costs, they recoil: More than 80% of U.S. adults say the cost of prescription drugs is unreasonable, and about 30% of adults report not taking their medicines as prescribed because of the cost, according to the health policy research nonprofit KFF.

Cost Plus Drugs' straightforward pricing also lets employers, other payers and academic researchers compare prices and get a clear picture of "how distorted the pricing in the mainstream market is," said Erin Trish, co-director of the University of Southern California's Schaeffer Center for Health Policy and Economics. "Five years ago that was unimaginable."

In that way, Cost Plus Drugs is "having a much broader impact in terms of shaking up the dynamics of the industry," Trish said, and stirring up louder calls to reform the system. The company is "sparking conversation," Trish said, "and sparking outrage."

A meeting with Sam Altman, a cold pitch to Mark Cuban

Oshmyanksy didn't set out to be a prescription-drug rabble-rouser. A biochemistry major, he earned his undergraduate degree at the age of 18. Early on, he wanted to be a high-energy particle physicist. But then he saw an article in a scientific journal comparing the universe to a soccer ball with many dimensions -- and rolled his eyes. "This isn't going to have any material impact on the world," he remembers thinking. "I should do something else."

The Littleton, Colo., native went on with his academic fireworks, earning a Ph.D. in math from Oxford University and his medical degree from Duke University. When he became a radiologist, he said, he saw some bad health outcomes caused by high drug prices. But what really sparked his entrepreneurial journey, he said, were the 2015 headlines about "pharma bro" Martin Shkreli, who became known for jacking up the price of a lifesaving medication and was later convicted of securities fraud.

Oshmyansky got together with some doctor colleagues, he recalls, and "very naively said, 'hey, let's create a nonprofit pharmaceutical company. We'll make the drugs, sell them at cost, it will be great.'"

Fundraising was a challenge. Oshmyansky applied to Y Combinator, the Silicon Valley startup accelerator, which supports some nonprofits. When Oshmyansky went for an interview with Y Combinator, he said, he was told his venture was very capital intensive and couldn't get off the ground as a nonprofit.

But a key figure turned up for his interview, he said, and took the time to talk with him afterward about a path forward: Sam Altman, who at the time was president of Y Combinator and is now CEO of OpenAI, creator of chatbot ChatGPT. Altman, Oshmyansky said, talked with him about converting his enterprise from a nonprofit to a public benefit corporation -- a for-profit entity that commits to supporting a public benefit. Oshmyansky took the advice, and was able to raise over $1 million. Altman did not respond to requests for comment for this story.

Then in 2018, Oshmyansky got an even bigger break. On a whim, he said, he sent a cold email pitch to Cuban. "He got back to me within like five minutes," Oshmyansky said.

The investor and TV personality had already been working on some healthcare related projects, Cuban told MarketWatch, and "when Alex emailed me, I was looking for new approaches to healthcare and reducing the cost of care. His proposal was a way to reduce the cost of meds, so I was interested."

The two got into a dialogue, with Cuban proposing the transparent, cost-plus pricing model and initially investing about $250,000. Oshmyansky's mastery of his subject matter and enthusiasm for adding sunlight to drug pricing ultimately gave the investor the confidence to dive in, Cuban said. "We complement each other well," Cuban said. "He knows how to deal with anything medical, technical, mathematical, pharmaceutical you can throw at him. He has an insane breadth of knowledge."

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