GoodRx bets on working with pharmacies as prescription-drug reimbursement pressure grows

GoodRx bets on working with pharmacies as prescription-drug reimbursement pressure grows Lydia Ramsey Pflanzer

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When GoodRx made its public debut in 2020, the digital health company built its business by working with pharmacy benefit managers, getting paid when customers used a PBM coupon to pay pharmacies in cash rather than through insurance. But over the last year, it’s been shifting its model to work more closely with pharmacies, negotiating deals with them directly rather than relying solely on PBMs.

The change at GoodRx comes as healthcare giants like Cigna and CVS Health are exploring new ways to pay for prescription drugs in which PBMs reimburse pharmacies at a rate including a set markup, the drug’s cost and a service fee. It’s a similar model to billionaire Mark Cuban’s Cost Plus Drug Company, which charges for medication based on a 15% markup off the wholesale price of the medication plus pharmacy fees.

Jim Sheninger, pharmacy strategy officer at GoodRx, said the company has seen increasing interest from pharmacies, particularly in setting up contracts to set prices on certain drugs. In September, For example, GoodRx announced it’s working with Walgreens to get lower prices on nearly 200 medications.

“I would think you’d probably see more pharmacies being more vocal about moving to some of these different types of models like cost plus, trying to take more of a stance on margin management while balancing growth,” Sheninger said. “For us, we’re going to keep adapting to that” by leaning into more direct relationships, he added.

GoodRx has taken some hits amid fresh scrutiny on drug costs and PBMs. CVS’ announcement on Dec. 5 that it would introduce a cost-plus model, for example, caused GoodRx’s stock to drop 7% that day on the news.

The strategy evolution also likely means a change in how GoodRx works with PBMs.

“I think our relationship with PBMs is going to shift somewhat like ours did with retailers,” Sheninger said. “We’re very reliant on them and they on us for our core business,” he added.

Pharmacies have been getting hit harder on the margins they make dispensing drugs, and the risk for GoodRx is that if it’s not seen as a good partner, it might get cut off from doing business. It’s happened in the past when a major grocer said it would no longer work with the company.

Sheninger said the new pharmacy model includes four different approaches:

• Direct contracts with retail pharmacies, in which GoodRx works fully with a pharmacy to set the prices they’re able to provide to consumers who aren’t paying with insurance.
• Striking up direct, cost-plus contracts with pharmacies on a certain subset of medications where pharmacies are feeling the tighter reimbursement margins. In this case, GoodRx’s typical PBM relationships cover the rest of medications.
• GoodRx uses one PBM network on behalf of a pharmacy.
• GoodRx uses its traditional business using a multi-PBM approach to provide discount cards to patients.

GoodRx reports fourth-quarter 2023 earnings on Feb. 29.