Arielle Bose: Hi, Stacey. This is Arielle Bose from EHD Insurance. Big fan of the podcast. We were talking about GoodRx the other day, and it occurred to me that I’m not exactly clear about how they make money.
So, Stacey, how does GoodRx make money?
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Stacey: Well, Arielle, that is a deeply great question and very apropos considering that we just did three episodes lately where GoodRx and what they do has come up with either main character energy or, at a minimum, in a fairly robust supporting role.
And right now I’m talking about episode 520, where we talk about generic drugs and best ways to make them affordable without accidentally making them unaffordable.
Episode 517 about why it sometimes seems like cheaper generics are not on formulary while some big brand is. That was episode 517.
Then episode 516 with Ophelia Johnson, where we talk about GLP-1s and how GLP-1s and cash-pay opportunities have very much turned into a consumer behavioral hack.
Okay … so, the question, “How exactly does GoodRx make money?” we actually answered. Ge Bai, PhD, CPA, answered it on Relentless Health Value back in 2021.
But a couple of quick updates before we get into the answer of the question. I feel like I’m building suspense here, but before we get into it, I will say that the core mechanics that Ge Bai lays out in the conversation with her that follows relative to how GoodRx makes money is that they still take advantage of the dysfunction in the pharmacy supply chain.
And while they help patients oftentimes save money, their kind of master plan only works because pharmacies would be charging cash-pay patients a pretty darn high price in most circumstances. And that is still true today.
If you go to a pharmacy that takes insurance and you walk in off the street with no coupon and you say, “What is your cash list price?” that price is going to be really high. Why, might you ask?
Well, one reason is the big PBMs have contracts with these pharmacies, like I just said—we are only talking about pharmacies that take PBM contracts—and these contracts do stipulate that the PBM must get the best prices that that pharmacy will offer.
And if the pharmacy is a little unclear on what that PBM price for any given generic med, for example, may be month to month, then obviously it would be in their best interest to make that cash price, that list price, high enough with a big cushion.
And this is, of course, exacerbated by the fact that 80% of the time for a patient in their deductible phase for the top 20 prescribed generics, the PBM rate itself is gonna be higher than the price a patient would pay if they showed up with a GoodRx coupon or went to Amazon, or probably Mark Cuban Cost Plus Drugs or any one of the number of cash-pay pharmacies, right?
So, the PBM rate is already high, and the pharmacy needs to make their list price higher than the PBM price.
All of this, by the way, which Ge Bai talks about as the market dysfunction that creates the opportunity for GoodRx or any of the other coupon vendors here, this is the opportunity that enables them to make money; and it is sadly pretty much the same since this episode aired—although I just did a little tool around the internet and I did see that there may be some legislation proposed to forbid this MFN (Most Favored Nation) “lesser of” language in PBM contracts that I just saw floating around.
So, right … this is the basis for how GoodRx makes money. It’s the problem that they solve, and they have figured out how to monetize.
Here is Ge Bai, PhD, CPA, on how GoodRx actually makes its money.
Big congrats to Ge Bai, who was recently nominated to be Assistant Secretary at the Department of Health and Human Services (HHS).
Ge Bai is a professor of accounting at Johns Hopkins Carey Business School and professor of health policy and management at Johns Hopkins Bloomberg School of Public Health.
This podcast is sponsored by Aventria Health Group, with an assist from Payerset, our series underwriter this year.
Also, thank you very much to Patient Rights Advocate, who gave us a very, very lovely donation recently to help us continue our mission over here at Relentless Health Value.
And here is Ge Bai answering the excellent question: How does GoodRx make money?
Also mentioned in this episode are Arielle Bose; EHD Insurance; Ophelia Johnson; Tom Nash; Mark Cuban; Mark Cuban Cost Plus Drugs; Aventria Health Group; Payerset; Patient Rights Advocate; and Luke Slindee, PharmD.
For a list of healthcare industry acronyms and terms that may be unfamiliar to you, click here.
You can learn more about Ge’s research on LinkedIn and X.
Ge Bai, PhD, CPA, is a professor of accounting at the Johns Hopkins Carey Business School and professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health. An expert on healthcare accounting, finance, and policy, she has testified in Congress, written for the Wall Street Journal and the Washington Post, and published her studies in leading academic journals such as the New England Journal of Medicine, JAMA, and Health Affairs. Her work has been widely featured in the media and cited in regulations and congressional testimonies. She was a visiting scholar at the Health Analysis Division of the Congressional Budget Office from 2022 to 2023. She teaches graduate courses and has received the Johns Hopkins Alumni Association’s Excellence in Teaching Award.
00:00 Introduction to this episode.
00:58 EP520 with Stacey about cash-pay generic drugs.
01:09 EP517 with Stacey about the financial motive behind prior auths.
01:19 EP516 with Ophelia Johnson.
06:22 The conversation with Ge Bai.
06:28 The difference between GoodRx and Amazon Pharmacy.
06:53 The one thing GoodRx makes money from.
07:55 How is GoodRx getting paid?
08:18 Are there middlemen in GoodRx’s financial model?
09:25 How PBMs play into the GoodRx model.
10:29 Where the pharmacy fits into the deals created by GoodRx.
11:51 EP439 with Luke Slindee, PharmD.
11:59 What’s changed since this conversation with Ge Bai.
Recent past interviews:
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Andrew Tsang, Stacey Richter (EP520), Dr Lisa Rosenbaum, Claire Brockbank, Stacey Richter (EP517), Ophelia Johnson, Michelle Cera, Matt Cantor