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Comment by orbitmech | Hacker News Reader

If anyone else is curious on GoodRX’s business model, here is a good write up I found from HBS https://digital.hbs.edu/platform-digit/submission/goodrx-or-...

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I don't think that is the full truth. Everyone in the industry seems to see goodrx as dishonest and they all state the same story similar to this recent one from reddit[0].

In my personal experience, the goodrx "coupon" for my drug was $30. Sure enough, at the pharmacy, I was charged $30. But if I use the same coupon the next month, the price is magically $57. I could print out a new coupon every time, but the process with the pharm tech to change to a different "drug card" (which is what they see it as) is nearly a 5 minute process. By contrast, my state offers their own group drug card, and the charge is usually around $45. It might go up or down by a few dollars every 6 months, but that is it.

[0]: https://www.reddit.com/r/explainlikeimfive/comments/ih4ziy/e...

The drug price changed, independent of your usage of the coupon. In my experience, I have used GoodRx for years and paid the same price always.

I’ve seen ca. 6-month price changes, and a complete reordering of the price ranking among pharmacies. Just go to the new pharmacy and have them transfer the Rx.

That comment does not understand how pharmacies get paid. The patient pay amount is irrelevant to how much the pharmacy makes. Pharmacies make money from prescription dispensing fees, which are generally around 1-2 dollars. PBMs are the ones that make money on patient pay amounts and are the same ones that pay the wholesalers, and they have different payout contracts depending on which card is being used. GoodRx relies on these PBMs for business, who have done the math on the arbitrage being in their favor. Source: I worked at a GoodRX competitor a couple years ago.

I worked with PBMs in the past and it's more than just the dispensing fee.

Typically a pharmacy will enter into a contract with a PBM and the PBM will reimburse the pharmacy for each drug at a set amount. That amount does include a dispensing fee, but the pharmacy can also make money off the margin between acquisition and reimbursement.

So if a months supply costs the pharmacy $30.

The PBM might pay $23 for the drug, $2 dispensing fee and tells the pharmacy to collect a $10 co-pay ($35 total).

Pharmacy makes $5.

However, what I've heard is that it's never that simple. PBMs are constantly trying to pay as close to acquisition cost as possible and when you have multi-source drugs (generics), they often just pay the lowest price.

So I've heard from pharmacies that some drugs have a 50% margin and other have a -20% margin. The PBM tells them it "all evens out" which is BS. The PBMs also have DIR fees, where a couple quarters later they claw back additional money, again arguing that the prior reimbursement was too high. The PBM model is really trying to squeeze pharmacy margins as much as they can.

That comment doesn't appear to explain anything about GoodRX changing their prices. It's ranting about how pharmacies lose money on the coupons, but I don't think that's how drug pricing works. If a pharmacy has a $100 drug and the coupon brings it down to $80, nobody "lost" $20.

This is standard pharmacy behavior. Has nothing to do with GoodRx, which is an advertiser. Pharmacies determine all prices. Different pharmacies have different loss leaders each month. You go to the GoodRx “best” price pharmacy with your bottle. That pharmacist will take care of the transfer, using the RX# and possibly calling the Dr. I will always do the legwork, to me it is a “dollar vote.”

The business model is simply to collect referral fees from Pharmacies and PBMs. Also to sell data back to insurers and pharmaceutical companies.

There are companies known as PBMs (Pharmacy Benefits Manager) whose sole purpose is to negotiate rebates and group discounts on behalf of insurers and employers.

GoodRx operates as PBM at scale or more exactly as an aggregator of deals from PBMs + Pharmacies. The pharmacies pay them because they drive volume and the PBMs pay them because they help to lower the cost of their medication programs which is one of the reasons they exist.

It's the same model of a coupon website.

>There are companies known as PBMs (Pharmacy Benefits Manager) whose sole purpose is to negotiate rebates and group discounts on behalf of insurers and employers.

All the big insurers have their own PBMs now so I'm not bullish on their business model lasting. Insurance companies hold the trump cards as they are the ones collecting the premiums and have the money. There's no reason for any of the big companies to give up margin to GoodRx. Maybe some of the smaller health plans might have to make deals with them.

GoodRx is taking up the same role as a PBM. If you use them, insurance is not involved in the transaction.

Insurance is involved with a PBM, just not directly. Insurers are the end payer. They just hire the PBM to manage their pharmacy coverage and spend.

At least the 5 biggest insurers operate their own PBM, so I don’t see the distinction between PBM and insurer to be useful.

In second sentence, them=GoodRX.

Yeah. But insurance companies are more profitable when they don’t cover the medications of their customers. They have PBMs because they don’t want get charged more than they should. Insurance companies would love everyone going through GoodRx because then they don’t have to pay for those medications.

There’s really no margins in paying for medications. This is always a red number for the insurance.

> But insurance companies are more profitable when they don’t cover the medications of their customers

This isn’t accurate. Insurance companies have legal fixed profit margins as a percent of spending, so they want this to be as high as possible. This creates a vested interest in both maintaining high prices and spending.

In an area with multiple health insurance companies, they can’t just keep spending more and keep raising premiums otherwise a competing insurer will take their business with lower premiums.

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