How GoodRx Profits from Our Broken Pharmacy Pricing System (2020)
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Having had to deal with this hassle in the past, I'm glad GoodRx exists. I don't know of any other industry that charges a higher cash price than medical insurance price.
Note: Costco pharmacy is slightly more competitive if you want your prescription mailed to you. Like GoodRx, you can compare pricing on Costco's website.
This is a thread is from 2019, when I accidentally discovered how much Americans might pay for a worming tablet: https://twitter.com/jawj/status/1199026735980990465
People that have good healthcare thanks to their job (and those that merely think they do) often view healthcare reform as something that benefits their competitors more than it benefits them.
This mindset is also why we have a narrative against all forms of social welfare, because they take our money (at gunpoint, as some would say) and give it to our competitor.
You hear about the horror stories but for a lot of Americans (not all) they have sense as to the cost of a drug beyond the $25 or $50 co-pay each month.
[1] https://www.covermymeds.com/main/insights/articles/2018-real...
Medicaid is almost zero out of pocket. Medicare is low cost as long as you don’t hit the donut hole.
Americans don't really understand price and value for money.
The ACA is really popular though so we just need to transition that to a medicaid/medicare buy in. I mean we already pay for that in our taxes anyway. A bigger issue is the medical lobby who likes the sweet sweet insurance money as does the insurance lobby who likes the sweet sweet insurance money of a relatively low risk pool (working Americans).
The mind boggles.
I believe it's wide open, you could say only accept gold bars and feral chickens for instance.(https://money.stackexchange.com/questions/77001/can-i-accept...)
The argument is that me buying a sandwich for $10 could also be validly viewed as the sandwich shop buying a $10 bill from me with the currency of a sandwich. Thus the method of payment is as subject to variation as the product being exchanged.
The robust utility of cash and why this isn't usually done is that I can have two $10 banknotes, one crisp and well preserved and the other ragged, dogeared and blemished but for the sake of the transaction they are both worth exactly $10 without any negotiation. That's a fairly unique property of money, it doesn't lose value with wear and tear or defects.
Anyways, when it comes to accepted payments, vendors are given a lot of liberties
In this case the thing to do is take the prescription to another pharmacy and use GoodRx there without giving them your insurance information. It sounds like this pharmacy acted in bad faith and that would be worth reporting to the pharmacy board.
And any business can refuse methods of payment, except cash in certain states and cities.
And in that situation, you've basically got breeding grounds for cartels and price-fixing. Even if not all the players hold the line, prices will take a long time to come down rather than how quickly they would in a high-competition market.
Heck look at how long it took carriers to stop charging insane money for SMS! It did eventually happen, but over the course of years as each carrier in turn put through small incremental price reductions to show growth for shareholders.
In Germany, we have the same situation (high barrier to entry - pharmacists need to study almost as much as doctors - and an insanely complex regulatory and billing scheme)... but we don't have issues that are relevant for the patients like the US has, because we have what the US lacks: a framework that has other people (=insurances + the government negotiating with pharma companies + government setting rates for medical services, the "GoÄ" ruleset) deal with the bullshit.
A person under government-mandated insurance (88% of Germans) won't ever see a bill for prescribed treatments (although there are tiny co-pays for medicine like 5-10€ per pack, and 10€ a day for hospital stays limited to 280€ a year). People financially disadvantaged (= receiving government aid, Hartz IV) are limited to 42€ a year in total medical co-pay, everything above that is waived.
The US has plenty of healthcare regulations but none that successfully tackle cost. Nowhere near enough work is done to force price transparency, and it's not just that this data is known but not displayed (like a Pharmacy's formulary) but rather that it's often _not known at all_ because there's so much money sloshing around, people just stick their finger into the wind and pencil in their best guess.
I think the German model is actually the easiest for the US to achieve and one with the best outcome - a public option under the ACA would be a great start. A *default* public option under the same scheme would be pretty much all we'd need to have the same framework to build from.
I think I read that 75% of Germans choose the non-government option and the rest stick with it. That seems like a very healthy balance.
Canadian telecom has better margins. Our government still thinks it's competitive (?)
> The media division had a 20 per cent profit margin in the fourth quarter, while the wireless division had a 45.1 per cent margin.
Lately they've been chopping away their media divisions for not being profitable enough...
https://www.wellandtribune.ca/ts/business/2021/02/13/the-fac...
The idea that I tell a pharmacist an arbitrary number I found on the internet and the price of the medication suddenly drops 80%…
Good on GoodRX for making this process less obfuscated, but wow the market is broken if that is how it works.
1. proprietary combinations which are sold by companies at a market rate "printed maximum retail price" which includes kickbacks to doctors, medical representative salaries and all profits. Other companies also make the combinations so its not like sky high rates with one company, market adjusts itself. The rates are expensive but people have to live with it.
2. Generic medicine. the govt markets generic medicine of around 700 combinations which are priced at usually 10% the proprietary prices because there are no kickbacks to doctors, no reps and stuff. Same is sold by private companies also who find generic medicine profitable.
The thing is, in india, medical insurance is still not prevalent. The companies cannot inflate the prices 1000% next month and expect everyone to continue buying the product.
In the US, medical insurance companies finance these pharma companies to keep highly inflated prices and its all fine for the consumer only if they are insurance buyers. For others, tough luck
Many countries can get away with it because manufacturers figure it's better to make a tiny profit than to be completely cut off from a market. And fighting it can be too much effort when you're dealing with small markets. American consumers in a lot of ways are subsidizing the rest of the world. One idea to fix it was to mandate that a drug company cannot sell to non-American consumers at a cheaper price.
When it doesn't work as well, drug availability is impacted and criminals make billions illegally exporting these drugs. And pharmaceutical corporations suffer, but that's not a problem for most countries.
The big problem which comes when a patient has to visit another city for treatment, you usually have to take a couple of relatives for assistance. Air/rail tickets, Hotel room/rented apartment, then food and transport for these people. That is usually more than the actual cost of procedure if the thing goes longer than a few days.
Yes. For a non emergency procedure it is common to shop around for either govt hospitals which is cheaper if not free but there is a delay in actual treatment or private which just quote you a figure. Then its just a matter of budget/ recommendations from friends.
Insurance is as i said, not prevalent so your savings count and sometimes people draw a credit but that is in exceptional cases.
Because the drug manufacturers are trying to make everyone pay as much as they can afford, which means they need to create various methods of procuring the drug with various hurdles/trade offs so the final price is obfuscated. The rich / less price conscious end up paying more.
> In the US, medical insurance companies finance these pharma companies to keep highly inflated prices
This is not true in any way. Insurance companies regularly deny payment for brand name medications and usually only pay for cheaper generics.
It is somewhat true in one important way: someone is paying for all that Big Pharma R&D, and it ain't developing nations or Western Europe's public healthcare system
Sellers might also want to sell to insurers and others with deep pockets at a higher price than to non-insured or buyers with less money. So they will negotiate one price with an insurer, and the insurer will try stipulate they can't offer anyone a lower price, but then the seller might be able to get around this via rebates or discounts for buyers that can't afford insurance, etc.
In a free market, alternatives come up because consumers dont want to pay for exorbitant prices, they just cant afford it.
Very few people are sufficiently knowledgeable about medicine and healthcare to be able to discern an appropriate price (much less determine if what they are buying is even necessary or not).
Hence society relies on #1) trust by assuming healthcare providers are acting on good faith and #2) a knowledgeable actor providing a second opinion such as a government healthcare payer like the NHS in the UK or private insurance companies in the USA, who employ teams of doctors and pharmacists to review people’s cases and determine appropriate levels care.
For example, if you have a plumbing problem, you can call 5 plumbers and get educated and make an informed decision. With a healthcare emergency, lack of time and lack of healthcare providers and other resources makes that an untenable solution.
From other sources, it appears that pharmacies actually lose money when accepting GoodRX discounts, and yet are unable or unwilling to lower their prices.
Very bizarre!
So you have to create all these rebates and introduce caveats to make the price obfuscated.
They can't get away with directly price gouging the consumer, so they transfer the price gouge to different parts of the supply chain so the pharmacy can eventually complain they're losing money. If anyone was actually losing money at the end of the day they wouldn't be involved.
It’s why you see so many grocery stores and Target offloading their pharmacy operations, and others closing down. They have no control over how much they will be reimbursed for the medicine they dispense, so basically it’s going to be CVS/Walgreens/Walmart/Costco left standing, but CVS saw the writing on the wall and merged with an insurer since going vertical is the only long term solution.
And yes you might think it’s the pharmacy getting the short end of the stick, but you’ll see cases where insurance, Pharmacy benefits manager and the pharmacy are all owned by the same group anyway. So really it’s just the consumers. But it’s hard to notice since this all unfolds into higher insurance premiums, co-pays etc, which get compared to list prices, which keep rising, but are disconnected from then producers net take-home.
Everyone else is just middlemen that I don't see wielding much power. All the PBM and rebate nonsense is just price obfuscation, but I don't see it changing anything even if it was all removed. It would just be rebranded some other way, as the goal is price discrimination, and to get richer entities (or those lacking in time/money to negotiate or hire someone to negotiate aka pay insurance premiums) to pay for more medicine since they can afford to pay.
By pharmacy getting crushed, I mean the retail operations. I imagine independent pharmacies won't be around longer, or if they are, they'll be making whatever scraps the insurance companies offer to throw them. There's lots of independent pharmacy owners who complain about not even knowing if the medicine they are selling is earning them money or losing them money due to the ability for insurance companies (and governments) to take back money for various reasons after the sale.
This is all part of the squeezing of margins due to automation and pharmacy retail services becoming a low margin commodity. Or forced to become a low margin commodity.
CVS went vertical with their insurance company/in person retail business, but I'm not sure if that will be as profitable in the long run as they hope. I've never seen in person retail work out well for profit margins on a large scale, except for Apple stores.
The PBM represents many insurance plans, but is independent of the insurance companies and is basically a hired entity to negotiate prices with pharmacies on behalf of the insurance plans. The PBM says to a pharmacy: we will give you access to the pool of end customers from the plans we represent as long as you are willing to sell at these listed prices, and with these terms and conditions. The pharmacy wants access to the customers, so they will usually agree.
The prices vary, and a few of them may actually be lower than the pharmacies costs, but many are well above, so overall the deal is usually OK for the pharmacy.
But be aware of a few of the terms and conditions. There are three important terms. The first important term is that if your cash price is less than the normal cash price, you must sell for that. So obviously the pharmacy will always want to sets is cash price higher than they think any PBM will offer. And possibly even higher than that if any PBMs have a term like you will sell to our plans for our price or 80% of your cash price.
The second important term is that the PBM gets a kickback on many transactions as sort of a "finders fee" (and is one of the ways the PBM makes money). These kickbacks and the like are also a mechanism for the PBM to allow negotiating with individual pharmacy chains while providing uniform pricing to the insurance plans. Remember each pharmacy chain has its own negotiated wholesale costs for the medications, so they can negotiate larger PBM kickbacks on some of those they have lower than normal costs, in order to get smaller kickbacks on products where they have higher than normal costs, etc.
The third important term is a term that these prices must be available to the PBM's partners.
Now we have GoodRX. GoodRX partners with many different PBMs, and basically lets its members get the cheapest price from any of them. The PBMs give GoodRX a cut of their kickback. The PBMs agree because they would rather get part of a kickback for non-members through GoodRX, than get none of a normal cash sale to the pharmacy.
The problem is that each of the PBMs have some really good deals (possibly money losing for the pharmacy) on different medications, and GoodRX can basically just use whichever deal of its partners is best. Thus GoodRX effective overall deal with the pharmacies is too good, and pharmacies only accept it because they agreed to partner price sharing with the PBM.
Seems the only difference is “it’s a tech company” which changes their valuation and ability to raise capital, but they still don’t seem to actually be disrupting anything, just another cog in the broken machine.
Or am I missing something?
An example is Azithromycin, which typically costs about $15/pill at 500mg, yet if you buy it direct from a lab that syntethizes the compound themselves at 99% purity, it costs around $0.04 for the same pill.
In powder form, it's hard to make e.g. 10mg dosage, the error margin can exceed 100% by hand or some cheap weigh, and powder will form small concentrated chunks.
When in a hurry go to PetCo!
The article says no.
Some articles and interviews for "rabbit holers"
[1] https://www.barrons.com/amp/articles/why-goodrx-ceo-isnt-wor...
[2]https://investors.goodrx.com/events/event-details/jp-morgan-...