Cost-Plus Pricing Reshapes Pharmacy, But Savings Are Not Guaranteed

Cost-plus pricing has become one of the most talked-about reform ideas in pharmacy, but the phrase does not describe a single system. Cash-pay pharmacies around the country have discussed alternative pricing solutions, advertising ingredient cost plus a flat markup, a $3 pharmacy fee, and $5 shipping.¹

At the same time, some of the largest pharmacy benefit managers (PBMs) have begun rolling out their own cost-based reimbursement programs under regulatory pressure, but separate research shows that cost-plus pricing, used as a government price-setting formula rather than a retail alternative, can produce some of the highest drug prices in the world.^2,3

Same Term, Two Different Formulas

At its simplest, cost-plus pricing means charging a fixed markup on top of an underlying cost. A cross-national analysis of pharmaceutical pricing frameworks lists cost-plus as one of 5 common models, alongside external reference pricing, value-based pricing, negotiated agreements, and free-market pricing.³

In that framework, cost-plus pricing is simple to administer but "ignores value" and is "vulnerable to inflation," with Iran, India, and Pakistan cited as exemplars. Value-based pricing tied to health technology assessment (HTA) is used in Germany, the United Kingdom, and Sweden, the authors said.³

The national, government-set version is a formula applied to a manufacturer's or importer's cost to set a national price. The retail version popularized by Mark Cuban Cost Plus Drug Company (MCCPDC) and adopted by independent cash pharmacies works differently, applying the markup after the drug reaches a US pharmacy, replacing PBM spread pricing and insurance markup otherwise layered on top.

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Gregg Jones, a pharmacist and founder of Compass Core Pharmacy in Rhode Island, wrote a blog post explaining the model.⁴ "We buy the medication from the wholesaler. We add a small, transparent markup to cover the cost of running the pharmacy...and that's what you pay. No PBM, no insurance middleman, no spread pricing,” he wrote.⁴

Both systems use the same arithmetic at different points in the supply chain, which is why one can produce among the highest drug prices in a comparison of 11 countries, and the other is marketed as a savings tool.

Savings Are Real But Uneven

A 2023 analysis in Frontiers in Pharmacology compared MCCPDC pricing with 2020 Medicare Part D spending for the 50 most-used generic cardiology drugs by volume, which totaled $7.7 billion that year.¹

Using 30-day MCCPDC pricing, the most conservative estimate found $1.3 billion (17%) in potential savings across 16 of the 50 drugs. A less conservative 90-day estimate found $2.9 billion (38%) in savings across 35 of the 50, led by nebivolol, rosuvastatin, and ezetimibe at $442 million, $188 million, and $182 million, respectively. However, lisinopril, amlodipine besylate, and metoprolol tartrate would have cost Medicare $606 million, $562 million, and $475 million more, respectively, under 30-day MCCPDC pricing.¹

A 2025 study in ClinicoEconomics and Outcomes Research conducted the same comparison for 15 antiseizure medications using 2021 Medicare Part D data, in which spending reached nearly $1 billion. For 30-count prescriptions, 9 of 15 drugs (60%) showed savings totaling $172 million—but when averaged across all 15, MCCPDC pricing was 14.85% more expensive than Medicare, a gap the authors attributed to the flat $5 shipping fee weighing more heavily on smaller fills.⁵

For 90-count prescriptions, 12 of 15 (80%) were cheaper, for $373 million in savings, a 31.63% average reduction; divalproex sodium extended-release led the savings, and lamotrigine ran 144.71% more expensively. The authors also flagged a clinical concern beyond price. Because MCCPDC's formulary was limited, patients splitting a regimen between MCCPDC and a local pharmacy risk medication errors, reduced adherence, and lost in-person counseling.⁵

A 2025 research letter in Pain Medicine made the same comparison for 25 pain and inflammation generics against 2022 Medicare Part D spending, which totaled $690 million. The authors estimated that matching Medicare's rates to MCCPDC's 2024 pricing could have saved $344 million.⁶

Nineteen of 25 drugs (76%) showed savings at a 30-count, totaling $200 million, and 24 of 25 (96%) showed savings at a 90-count, led by celecoxib at $134 million. Naproxen sodium extended-release was the outlier, running roughly $33 million more expensive than Medicare in both counts.⁶

A Cautionary Case From Abroad

The same formula looks very different when a government, rather than a single pharmacy, sets the markup. A 2025 study in the Journal of Research in Pharmacy Practice benchmarked Iran's cost-plus drug pricing system against those of 10 other countries using World Health Organization/Health Action International survey data.³

Iran's public-sector median price ratio (MPR)—local price divided by an international reference price—stood at 6.70, nearly 7 times the reference benchmarks included for other countries. Its out-of-pocket (OOP) burden exceeded 52%, and only 6.4% of surveyed facilities stocked originator-brand medicines, vs 44.7% for generics. By comparison, Germany, France, and the United Kingdom, which rely more on value-based and negotiated pricing, posted public-sector MPRs near 1.00, OOP burdens of 12% to 14%, and brand availability above 85%.³

A regression model across the 11 countries found that dominant cost-plus pricing independently predicted a 178% higher MPR (β = 1.02; P < .001) and that each 1-percentage-point rise in annual inflation added roughly 2% to the log of the MPR (β = 0.02; P < .001). The authors modeled 2 reforms for Iran: a 30% consumer-price-index (CPI)-adjusted price cap, projected to lower the OOP burden from 52% to 35%; and a shift to HTA-linked value-based pricing, projected to cut it to 20%.³

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"Static cost-plus pricing perpetuates catastrophic patient costs," the study authors wrote, adding phased reform toward inflation-indexed ceilings and value-based pricing "can transform unaffordable systems into sustainable, equitable models."³

PBMs Adopting Cost-Based Reimbursement

Cost-plus pricing is also reshaping the intermediaries it was designed to bypass. In a US Federal Trade Commission settlement finalized February 4, 2026, Express Scripts agreed to adopt cost-plus reimbursement—acquisition cost plus a dispensing fee—while eliminating spread pricing and rebate retention and disclosing detailed pricing and broker payment data. This agreement effectively set a competitive benchmark other PBMs are now measured against.²

The Consolidated Appropriations Act of 2026 adds its own pressure, requiring PBMs to file semiannual reports on per-prescription plan payments, pharmacy reimbursement, and the spread between them, and mandating that manufacturer rebates pass through in full to Employee Retirement Income Security Act (ERISA)–covered employee group health plans. A rule the Department of Labor has proposed would push this further, requiring PBMs to report every dollar they make off a plan, including rebates, spread, and clawbacks. In effect, it would make watching over PBM pricing an ongoing duty under ERISA.²

Two of the largest PBMs have already responded. CVS Caremark's answer is a program called TrueCost, which ties prices to actual drug costs. OptumRx introduced Cost Clarity, which calculates drug prices using National Average Drug Acquisition Cost (NADAC) or wholesale acquisition cost (WAC) figures, then adds a markup and dispensing fee. Both companies are aiming to have their programs fully running by 2028.²

NADAC comes from pharmacy invoice costs, so it is viewed as more reliable. WAC, by contrast, is the list price a manufacturer sets for wholesalers—it tends to exceed what a pharmacy actually pays.²

What This Means for Pharmacists

For pharmacists fielding patient questions, the retail cost-plus model offers a legitimate cash-pay option for patients on generic maintenance medications, those with high-deductible plans who have not met their deductible, and those without insurance. It is a poor fit for expensive brand-name specialty drugs, where list prices are too high for cash pricing to compete, and for patients on Medicaid, where existing coverage is generally the more affordable route.⁴

Because no cost-plus pharmacy, including MCCPDC, stocks every medication a patient takes, splitting a regimen between a cost-plus source and a traditional pharmacy can complicate reconciliation and reduce the continuity of a single pharmacist managing a patient's full drug list.⁵

For pharmacists on the contracting side, the direction of travel is toward more cost-based reimbursement. As TrueCost and Cost Clarity move toward full implementation, and federal rules push PBMs to disclose spread and pass-through rebates, the difference between NADAC, WAC, and algorithmically derived acquisition-cost estimates will matter more at the negotiating table.²

What the 4 studies together make clear is that cost-plus pricing is a formula, not a guarantee. What a patient or a payer ultimately spends depends on where in the supply chain the markup is applied, how fixed fees interact with prescription quantity, and whether the system protects against inflation—the same variable that turned a simple pricing rule into one of the most expensive drug markets among the countries studied.³

REFERENCES

1. Narendrula A, Lang J, Mossialos E. Generic cardiology drug prices: the potential benefits of the Marc Cuban cost plus drug company model. Front Pharmacol. 2023;14:1179253. doi:10.3389/fphar.2023.1179253

2. Farkas AC, Dresser JC. The rise of cost-plus pricing models: what pharmacies need to know. Frier Levitt. April 2, 2026. Accessed August 25, 2026. https://www.frierlevitt.com/articles/cost-plus-pharmacy-pricing-pbm-reforms-strategies/

3. Hayat H. From markup to value: global implications of Iran's cost-plus pharmaceutical pricing for emerging markets. J Res Pharm Pract. 2025;14(3):98-104. doi:10.4103/jrpp.jrpp_34_25

4. Jones G. Cost-plus pharmacy explained (and why it's not insurance). Compass Core Pharmacy. August 6, 2026. Accessed August 25, 2026. https://www.compasscorerx.com/blog/cost-plus-pharmacy-explained-and-why-its-not-insurance/

5. Smith T, Young A, O'Brien C, et al. Medicare savings for seizure drugs by adopting the Mark Cuban Cost Plus Drug Company model. Clinicoecon Outcomes Res. 2025;17:447-453. doi:10.2147/CEOR.S516583

6. Rowsey K, Khan A, Brassfield J, Rashid M, Duncan J, Vassar M. Lowering pain and inflammation drug costs: evaluating the impact of a cost plus drug company model. Pain Med. 2025;26(9):607-610. doi:10.1093/pm/pnaf034