OPEN v_refcursor FOR
SELECT                                 /*+  FULL(a) PARALLEL(a, 5) */
               *
          FROM items a
          WHERE a.sku_status = 'A'
                AND a.RPT_FLAG =
                       DECODE (V_COSTTYPE,  '1', 'U',  '2', 'O',  '4', 'O')
            AND DECODE (V_SELBU, '-1', V_SELBU, BU_ID) IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELBU) AS item_commatotab_type)  
                                    FROM DUAL))
                AND DECODE (V_SELLOB, 'DEFAULT', V_SELLOB, LOB_DESC) IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELLOB) AS item_commatotab_type)  
                                    FROM DUAL))
                AND DECODE (V_SELBRAND, 'DEFAULT', V_SELBRAND, BRAND) IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELBRAND) AS item_commatotab_type)  
                                    FROM DUAL))
                AND DECODE (V_SELFP, 'DEFAULT', V_SELFP, FAMILY_PARENT) IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELFP) AS item_commatotab_type)  
                                    FROM DUAL))
                AND DECODE (V_SELFAMILY, 'DEFAULT', V_SELFAMILY, FAMILY_DESC) IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELFAMILY) AS item_commatotab_type)  
                                    FROM DUAL));

AND DECODE (V_SELLOB, 'DEFAULT', V_SELLOB, LOB_DESC) IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELLOB) AS item_commatotab_type)  
                                    FROM DUAL))

AND
 (  (V_SELLOB='DEFAULT')
 OR LOB_DESC IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELLOB) AS item_commatotab_type)  
                                    FROM DUAL))
 )

 AND 
   ( (V_SELBRAND ='DEFAULT') OR BRAND IN
                       (SELECT *
                          FROM THE (
                                  SELECT CAST (
                                            item_comma_to_tab (V_SELBRAND) AS item_commatotab_type)  
                                    FROM DUAL))

   )

AND DECODE (V_SELLOB, 'DEFAULT', V_SELLOB, LOB_DESC) IN

SQL> set serveroutput on
SQL> declare
  2     vsql varchar2(32000);
  3     vdummy varchar2(1) := 'X';
  4     c1 sys_refcursor;
  5     vdummy_2 varchar2(1);
  6  begin
  7     vsql := 'select * from dual where dummy = :1';
  8     open c1 for vsql using vdummy;
  9     fetch c1 into vdummy_2;
 10     close c1;
 11     dbms_output.put_line('vdummy_2 = '||vdummy_2||'...');
 12  end;
 13  /
vdummy_2 = X...

PL/SQL procedure successfully completed.

1) what is the number of rows in items

2) what is the number of rows in items for SKU_STATUS='A' and each type of RPT_FLAG

3) how well does each additional parameter improve performance for your delimited strings (rowcount again).  Consider that you will not be able to use more than one index as an access path to the data even if the user enters multiple values, unless you use BITMAP indexes, but don't get there unless you really have the right kind of system for them.

select a.*
from  (
       select substr(
                     ','||V_SELBU||','
                    ,instr(','||V_SELBU||',',',',1,rownum)+1
                    ,instr(','||V_SELBU||',',',',1,rownum+1)-instr(','||V_SELBU||',',',',1,rownum+1)-1
                    ) bu_id
       from dual
       connect by level <= length(V_SELBU)-length(replace(V_SELBU,','))
      ) b
     , items a
wher a.bu_id = b.bu_id
and a.sku_status = 'A'
and a.rpt_flag = decode(V_COSTTYPE,  '1', 'U',  '2', 'O',  '4', 'O')
/

create index on items (sku_status,rpt_flag,bu_id)
/

ABC,DEF,GHI works fine and is my guess what you have
"ABC","DEF","GHI" won't work unless you account for the double quotes via the substr
ABC, DEF, GHI won't work unless <space>DEF and <space>GHI are that values you want

1) use DYNAMIC SQL to build a query with only the pieces you need each time.

2) build a query using a different unpacking method so that you can remove references to the table functions, and have a query who's syntax allows use of indexes.

3) make sure you understand the filtering potential of your input criteria and create indexes appropriately.