Last week’s news that
(ticker: AMZN) had started an online pharmacy caused big waves in the health-care sector.
But Amazon Pharmacy might not be the transformative industry event people initially thought, explains GoodRx CEO Doug Hirsch. The mail-order pharmacy business is more challenging than simply boxing up drugs and shipping them off, mostly because there’s a giant insurance industry working behind the scenes. Amazon has been in the business since its 2018 purchase of PillPack, and it partners with companies like GoodRx in that business already. GoodRx, which is based in Santa Monica, California, finds cheaper prescription-drug prices for customers.
Hirsch explained what’s changed since the news and what hasn’t in a recent interview with Barron’s. An edited version of the conversation follows.
Did you hear that the Amazon Pharmacy news was coming?
There’s actually not a lot of new there. Amazon has had an online pharmacy since they acquired PillPack in 2018. And they’ve been trying many things to build PillPack because as you know Amazon is really great at shipping things and warehouses and stuff like that.
Amazon would love a world where you get your drugs delivered in the mail, right? They would love a world where they could use the efficiency and the skill that they have in shipping to make drugs appear just like TVs and toilet paper and whatever else people get.
The problem is that health care is crazy complicated. There are other constituents involved such as insurance companies. And the insurance plan that you have offers mail order. Do you know what a pharmacy benefits manager is?
Can you explain?
When you have insurance—Aetna,
(CI), Blue Cross—they farm out all the drug-related stuff to a PBM, a pharmacy benefits manager. The biggest one is Express Scripts, which is owned by Cigna, and there’s also Caremark, which is owned by CVS. Those PBMs really control the destiny of insured Americans. They decide who they contract with and what pharmacy. They also sell drugs. So not only are they providing you a benefit, but they sell it to you as well.
I’m old enough to remember Drugstore.com back in 2000. This was web 1.0 and said they were like ‘oh, we’re going to sell drugs to Americans,’ and all the PBMs came along and said, ‘No you’re not.’ And so basically they got shut down. Amazon was a partner of Drugstore.com as was Walgreens. It just did not work.
What is the difference with mail order?
Doing mail order is really, really hard for that reason, because they have to work with insurance companies and also because, believe it or not, consumers aren’t as dying to get their drugs in the mail as you might think.
Mail is about 5% of total prescriptions in the U.S. Even in the pandemic it really hasn’t grown that much. People really like going to the pharmacy. They want to pick up their shampoo and they also want to talk to the pharmacist about that thing—that rash they have or the side effects of this drug. It’s like a mini doctor visit.
Amazon wants to list drugs and drug prices on their website. But if they want to show a price and still accept insurance, they can’t do it themselves. The only way to get around that is to use a third party company. They use InsideRx, which is Express Scripts.
We built the InsideRx program with Express. What partnering with InsideRx did is it allowed Amazon to post a price on their website just like any other product and service without violating insurance contracts because it’s not their prices, it’s InsiderRx prices. To continue with all the other bizzaro world rules of mail-order pharmacy, that same price has to be available elsewhere. [This is why Amazon’s discount card can be used at major pharmacies like CVS and Walgreens].
It’s not GoodRx versus Amazon. We’re a marketplace. We don’t even sell drugs. We provide people with the best prices wherever they may go. So that’s why Amazon is a partner and PillPack is a partner.
When someone buys a drug on PillPack and says they don’t have insurance, they actually apply GoodRx as the discount.
Are you going to be replaced?
What I know from our conversations with Amazon—and again we’re quite friendly with them—is that people can still use GoodRx at PillPack and Amazon Pharmacy. That has not gone. People assume it’s us versus Amazon: Winner take all. It’s not that at all.
We like to describe ourselves as the Switzerland of health care. Manufacturers, we’re going to work with. PBMs, we have relationships with every single one of them. Being consumer first, it’s the reason I wake up every day.
What’s your next move?
We’re starting to tackle other pain points of health care. For example, most of what we have been talking about is generic drugs. Generic drugs make up 90% of the prescriptions filled in this country. But the other 10% —the brands—are the ones that get all the headlines, right? The $500,000 drug.
What we’ve done is we’ve gone to the manufacturers and said you guys have got to do better. I would argue probably 5-6 years ago they would have hung up on us. But there’s enough public pressure, there’s enough activism by consumers that they’re realizing ‘wait a second we’ve got to do something here.’ So we’ve actually started to roll out a number….I think we’ve launched 30 programs in Q3 to really start to attack brand drugs. Because we can actually get that price to as low as zero.
Another thing we’re tackling is telehealth. What I like about telehealth is it’s much less expensive. So if I can do this from my couch I can do it for less, it’s more efficient for everybody. We acquired last year a company called HeyDoctor, and we offer just plain old cash-based doctor visits that I think start around $20. Again, no fancy tricks, none of that. You can see a doctor… talk to them and have a prescription sent to your house without literally ever leaving your bed. I want it to be not only convenient but super affordable for everybody.
Write to Liz Moyer at [email protected]