Overview
On October 25, we spoke with a senior marketing executive at one of the top 10 global pharma companies about digital marketing/advertising trends and the use and utility of platforms like GoodRx (GDRX) and Doximity (DOCS), among others. We learned that digital spending will continue to expand even after pandemic-related restrictions are lifted. That said, an ROI below 5x is "not super interesting" in the grand scheme of things, especially if the service or tool doesn't result in a direct relationship opportunity [for pharma] with patients. Interestingly, we heard GDRX raised prices around 1Q21, effectively lowering the ROI that in our contact's view is not below 5x but is trending lower. We were somewhat surprised to hear about a willingness to try nearly every platform, and there's a lot of competition out there - a lot of different angles. DOCS has a very good ROI and is useful in engaging the providers and building relationships, for example, and then OptimizeRx (OPRX), Optum Perks, SingleCare, RxSaver, et al. all seem to have their selling points and will generate interest in the market.
Highlights
- GDRX's end of 1Q21 price increase does not seem coincidental. Rather, it may have been driven by the shortfall in MAU/MAC growth. We think it'll be critical for MAU to move higher, expanding GDRX's reach over time, to justify the spend.
- Smaller pharma companies are likely to follow big pharma, especially if a product manager is at risk of missing numbers - they'll reach out to GDRX or someone else as a solution. Longer-term, GDRX's success as a marketing tool is less certain.
- It seems credible to our contact that there are 35MM-40MM potential users for the GDRX platform, max level; however, this is not yet a certainty given the competitive set. OPRX may be a threat.
- Digital spending is likely to move to and beyond 50% of spend in a couple of years (from ~35% for our contact today).
- DOCS offers manufacturers a relatively high ROI and could be a winner as doctor introductions will help develop internal patient support programs, the ultimate goal of the marketing (i.e., direct relationships w/ patients are possible).
- Potential losers will be software for in-person sales support and print marketing geared toward in-person visits. Budget share rotates from these to digital. Longer-term, digital spending will compete with PBM rebates and sales reps if pharma companies can develop patient relationships.
Call Notes
Edited lightly for length and clarity.
Background: Our contact has 20 years of experience in pharma ranging from consumer health care and generics to branded Rx. He has P&L responsibility for marketing at one of the top global pharma companies (by revenue) and manages all digital and other offline/online spend, including the selection of partners/vendors. He has experience w/ GDRX, DOCS, OptimizeRx (OPRX), Optum Perks, SingleCare, RxSaver, and copayment/patient support and patient engagement programs.
Let's go top-down to start... what % of your bucket is digital and how’s that changing?
- About 35% of all spend is on digital, which broadly includes GDRX, DOCS, OptimzeRx, etc. and social media directly (FB, Insta, etc.). This has been growing (up from ~20% a couple of/few years ago) due to COVID-19 changing the rules of the game.
- Face-to-face stopped, so everyone is reconsidering the business model, remote detailing, round tables, etc. I think 35% is a modest level. Some companies - e.g., those with a consumer health care business - have a higher % digital spending.
- It was ~20% just a couple of years ago too. It's been growing and will likely exceed 50% looking out 3 years as this revolution in terms of digitization continues.
With sales reps' access to doctors restricted, the use of PBMs and rebates to gain access, sales force optimization tools (IQV, VEEV), etc., it seems like the trend toward digital tools, social media, etc. is around that "next level" or access to a consumer about to purchase (or MD on DOCS that you can reach)... What was/is your level of interest in GDRX and how have things changed?
- Next-best actions, market access, etc. – the whole approach, not only to 35% of marketing spend on digital... the paradigm has changed.
- GoodRx – take them for example – 70k pharmacies - I have experience working with them. I know how they can help and what the ROI can be - as the budget holder, I can tell you there's definitely interest in GDRX today - there has been with MAUs growing, but the market is changing.
- We will have to see what new data, new insights on patients, and participation is like (where there’s participation). Interest is not only Rx, but subscriptions and being higher in search results or involved in only Rx, but subscriptions and digital spending for being higher in search results or involved in copay programs.
What if MAU/MAC doesn’t grow? How has the coverage and reach changed? Are you getting to an insured user that’ll be a consistent buyer?
- If I look at analytics on dollars spent, it's not only coverage. I look at average ticket, etc., and want to be there for chronic conditions - more time with the patients. I don't know if I'll work with GDRX in a couple of years. It is a good substitute for insurance in the US for now. The point is, today, yes, I'm very interested because they have a good and solid base of patients - especially the Gold Card – that are ready to pay. What will come later given the rising cost of digital ads on GDRX, I don't know. That could limit future investment on GDRX.
- For me, it's much better to have a tie to the patients. With GDRX, you have to split the control of the individual and share the profit per transaction. Yes, we get the impression, but they own the databases.
How does it work w/ generic vs. branded?
- If you plan to do something w/ branded vs. generic, well, you've got to do something to the price to be interesting to patients/consumers. If there's not a decrease in price, patients won’t be interested. They'll go to generics.
- Point being, you've got to advertise branded drugs w/ some sort of price difference vs. generic, and you can’t decrease price on branded products to the same level vs. generics just to create an incentive for patients to buy branded. Yes, there’s a difference, but it’s a high-quality drug, supported by data, approved by the FDA, etc. So there are "unique opportunities" like you can save on the out-of-pocket – save 35-40% off the list price - with limits on time and duration.
- If GDRX is telling the truth that they have a large # of insured patients, this can fill the gap? Yes, customer satisfaction surveys show users of GDRX will buy generics for sure.
It’s 5MM/mo. and could go to 20MM+, but it’s been slow user growth… are there really other options?
- Yes, it’s been slow. Where’s the top? I think it's probably 35MM-40MM max users in the US. With so much competition - Optum Perks, Blink, RxSaver, etc. etc. - there’s a risk. GDRX has the most share and today we're interested, but again, tomorrow is a big question.
- If I see the ROI dropping because GDRX is raising prices for drug manufacturers, that could lead to less interest in branded and more in generics with some of the copayment programs, there's interest.
OK - is Optum Perks a better offering?
- I can’t say it’s better, but it’s definitely a good alternative. Optum has ~65k pharmacies and OptumRx, a more broad value offering. Without the data, it's hard to say who is better on CAC, ROI, average ticket, etc. The thing is, one-off deals are less interesting. Again, you need long-term relationships with patients. I'm more interested in follow-up and repeat buyers vs. a one-off through GDRX.
- I expect GDRX to get smarter. OptumRx is looking at this too – the coverage long-term on critical/chronic conditions. Diabetes for example - a trial for a market not covered previously, if a patient doesn't have money to cover the Rx w/ insurance plans, it's very worthwhile offering the discounts.
How should we think about customer acquisition cost, yield on that, and ROIs… has it been accurate? Is there enough history there?
- All I can say is the ROI is deteriorating right now, especially on generic drugs. GDRX is raising prices. The buying power is shifting in the market – they are trying to put more cost on sponsors’ shoulders. It's still good and I'm satisfied but waving a flag to GDRX… it started at the end of 1Q21. That's when Optum Perks became more interesting, as well as RxSaver (chronic may be attractive).
Do you get nervous about Optum Perks being in Optum? Is it transparent enough?
- Yeah, the model is not transparent. They declare or guarantee an ROI, but we don’t know which kind of price the user pays for the drugs.
GDRX talked about # of customers, # of products, and % of portfolio they have. They laid out the opportunity recently. Do you think there are more companies looking at it and who has the runway? If not GDRX, who would you bet on to 5x revenue in five years? And, will you and your peers approach GDRX the same way and push more products through these arrangements?
- GDRX gained early momentum. A lot of companies are interested. The early adopters/divisions tested something and found it to work, so they invest more. Others will wait for early adopters to test something and evaluate the pros and cons. We were not the first to work with them, and it's not our strategy to invest in a one-off that we can’t control 100%. So, the option to build your own database is interesting. OptimizeRx and other copayment programs allow for that.
- In terms of ROI, it’s much more interesting to invest in OPRX by far, but GoodRx wins by volume of transactions. If anyone becomes bigger, it will shift spending.
- The typical pharma company dealing w/ GDRX is a generic company that’ll fight (lower price) – if you're going to work with GDRX, you've got to evaluate the risk of incoming calls: "What are you doing with prices on GDRX? I want the same prices." So we must be accurate and limited in pharma areas, limited in timing, It’s defensible and a complementary digital strategy to cover incremental segments, but you've got to be strategic.
- GDRX is not going to increase sales volume – it’s not big enough to do that. And I could stop/start or reallocate quickly (not happy about the price increases).
- It is true that it's an ideal triangle - GDRX is providing something to patients, pharmacies, and manufacturers - but I'm paying for it. It's not something unique or sustainable that can win competition on therapeutics b/c I can only touch 1MM of the people - what about the rest of the US population?
What about something like DOCS and the relationship w/ subscribers? GDRX puts info into the doctors’ offices too… Then there's HIMS and these virtual digital care places… Teladoc, and advanced primary care players building digital relationships. If you want access to the consumer and relationships and there's consistent value managing chronic illness, are there different ways to think about how things will go?
- I think GDRX today could end up a commodity w/ digital services - i.e., it'll be "me too." I mean, I'm looking for other partnerships with patient support programs or w/ providers. That's why DOCS is interesting.
- DOCS - getting in front of health care providers w/ products is interesting. They provide a higher ROI vs. GDRX.
DOCS – if they rank higher, impressions, and are more efficient than sending reps out, how do you get to the patient/consumer?
- The point, if you’re talking the consumer piece, is really if we're going to get to the consumer. I want to go with patient support programs or where we can control everything. There's lower quality of data and less transparency with DOCS, but we know we're in front of the doctor, and then OptimizeRx provides more transparency.
- Health care provider communities – the place where the providers are, that's DOCS' value. It's not about getting to the patient through them.
Will companies losing market share fight using GDRX? If there's career risk (lose job because of share loss), would that benefit GDRX? Asked differently, will they get more customers spending more on the platform?
- Yes, absolutely. With all the pricing, competition, etc. the revenue is huge, but what you get in your pocket is low. There's a lack of differentiation between products – that's a concern for GDRX.
GDRX says high single-digit ROI... right? With it declining for you, is there a threshold? Is 4x-5x still good?
- If the ROI is lower than 5x, I'm not going to work with them anymore (it's not there yet) … I'm not happy about the price/cost increase and declining ROI. If it gets to a point, I will stop and shift more attention to the other platforms we've talked about - RxSaver has a better ROI, Optum Perks, and Blink is an option too. We've talked about OPRX a lot.
- The DOCS ROI is much higher – they claim 10x, but it’s not that high. It is higher than GDRX and the threshold to stop is lower because it's an interesting future option for the health care provider side.
Who loses if digital continues to gain share of your spend?
- Offline strategies – face-to-face declines. For example, we're spending less on optimizing. Live events – attendance is way down at symposiums, people are not talking about resort events and such. Also, marketing materials – production materials for detailing. There's huge spend there (millions of dollars on print stuff that's not needed). Big picture, the shift could impact Veeva and IQV (IMS).
Please reach out to with feedback or inquiries.
Thomas Tobin
Managing Director
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