The Rise of GoodRx: Privacy, Cost, and PBMs
Prescription discount cards have been around for well over three decades, but their popularity has spiked in the recent past. Also known as “cash savings cards,” they offer consumers a convenient way to save on out-of-pocket costs when purchasing prescription medications at their local pharmacy. The concept behind drug discounts is certainly nothing new—I remember (many years ago) watching my grandma clip drugstore savings cards out of the newspaper before a trip to her local pharmacy. What is new is that the concept is now being widely applied to prescriptions, and makes use of the vast resources available through the internet.
Enter GoodRx. GoodRx is an American company with over $600 million in annual revenue and a market cap of almost $18 billion. Roughly 20 million customers use its website or mobile app each month. GoodRx provides comparison pricing for out-of-pocket prescription drug costs, as well as discount coupons enabling consumers to access the lowest prices available in their neighborhoods. Since 2011, GoodRx has become one of the largest providers of cash discount cards, raised about a billion dollars in funding (including a public stock offering), and is likely the most popular destination for patients looking to save money on their cash prescriptions.
So how has GoodRx become so popular?
To understand why GoodRx has become a household name, one must understand the players in the space and how they work together. The players in the healthcare market that are responsible for overseeing the creation and use of discount cards are pharmacies, marketers, and the lesser known—but critically important—entities called pharmacy benefit managers.
A pharmacy benefit manager (PBM) is a third-party adjudicator of pharmacy claims. PBMs such as Express Scripts, Caremark, and Optum have historically managed prescription drug benefits on behalf of health insurers: curating pharmacy benefit plan options (e.g., deciding on a formulary), determining out-of-pocket costs, and negotiating rebates from drug manufacturers. Because PBMs have traditionally worked with health insurers, in the past they were only involved when consumers pay for drugs through their insurance plans.
However, PBMs wanted to be involved in cash transactions too, so some of the larger PBMs began negotiating cash discounts directly with pharmacies. The discount is usually based on a percentage of the drug’s cash price and the resulting cost to the consumer can even sometimes be below the pharmacy’s acquisition cost. The PBMs benefit as they are able to collect information about patients purchasing their prescriptions in cash.
They are, in fact, the largest data aggregators in the marketplace. And as we know, in today’s market, data is valuable currency.
So, the PBM negotiates with the participating chain/local pharmacy to provide a discount to consumers. The PBM then finds “marketers,” which are simply companies or organizations that are in a position to market their discount card. These groups can be for-profit or non-profit organizations. GoodRx is a for-profit marketer. Critically, a key component of the marketer’s service to the PBM is facilitating the collection of consumer data.
Next, let’s unpack the components that go into the price that the consumer pays when they use a GoodRx (or any) discount card. The cash price amounts to the sum of the following:
- The negotiated discount price for the medication;
- A transaction fee payable to the pharmacy;
- A PBM transaction fee payable to the PBM; and
- A marketing fee payable to the marketer that gets you to use the discount card.
So who pays all these fees? The patient, of course! Notably, the patient is paying not just the pharmacy and the marketer, but also the PBM who is collecting information on them. This information includes everything, such as their name, address, phone number, age, location, prescription drug, medical condition, drug dosage, sig code (how the medication is taken), and even the cash price paid.
Let’s explore what this means for consumers.
As one of the largest marketers in the field, GoodRx does some amazing things for the healthcare industry. I think anyone will agree that prescription medication pricing is in desperate need of reform. We need price transparency and improved accessibility to medicine across the nation.
But it’s important to remember that these discounts come at a cost. And with GoodRx, as with all marketers, that cost is personal data collection.
So why does this even matter? As consumers, we’ve been programmed to know that by entering into loyalty programs, we’re exchanging data to receive discounts. This all-too-common transaction is something that is now generally accepted, and cash savings cards are no different. But where does patient data go? When a GoodRx coupon is used, that information is transmitted to one of the PBMs previously mentioned. PBMs claim to collect this information as a means to improve patient outcomes and better understand how Americans utilize prescription drugs.
PBMs were designed to be a practical means of regulating drug costs, but in practice, the pharmacy benefit managers are among the most problematic participants in the healthcare system. They act as intermediaries between pharmaceutical manufacturers and health plans and they often have conflicts of interest that severely distort competition and increase the cost of drugs for consumers. Moreover, GoodRx has created a business that loops PBMs into cash transactions where they never existed before. GoodRx has become one of the largest marketers in the space and therefore they have a tremendous reach to patients. As some of the most profitable entities in healthcare, PBMs are ecstatic to work with GoodRx as a means to collect enormous amounts of information about consumer drug purchases.
The most important thing when it comes to buying medications in cash is to be informed. There’s always a tradeoff between price incentives and relinquishing personal information. When using GoodRx to save money on prescriptions, it is absolutely critical to recognize that it comes at the cost of giving up your personal health information.
Jeff Carroll is the Founder and CEO of JC Telemedicine. As a founding member of an online pharmacy, Jeff saw firsthand the challenges that plague our healthcare system. Jeff is determined to make healthcare affordable by bringing price transparency to the market. Follow JC Telemedicine on Twitter, LinkedIn, and Facebook, and visit us online. For more information about telemedicine, PBMS, or how we can help scale your practice for the digital age, feel free to send us a message.