Takeaway: We're becoming incrementally more cautious of Good Rx's published TAM and potential for adoption.


On September 29, we spoke with a pharmacy industry veteran with experience at retail and hospital-based pharmacies dating back to the late ‘90s. He’s presently at the helm of a large network of inpatient, outpatient/retail, and institutional pharmacies across 20+ states (over 50 “retail” pharmacies). 


1. It sounds like GDRX is well-liked by providers (the physicians) and has a lane to swim in.

2. We heard again how a pharmacy’s own coupon program could displace GDRX (if pushed/managed properly).

3. The TAM isn’t likely as large as people think or GDRX wants to believe.

4. Higher vaccination rates YoY support our #NoFluSeason thesis.

5. Amazon could be a buyer of GDRX or it’s biggest competitor.


How do you interact with GoodRx in the hospital setting?

  • Physicians will look to GDRX and try to get a price for patients when asked, especially for a new prescription. Providers are very familiar with the product and like to talk about it.
  • Part of the reason is “we” don’t have our own discount card, which could replace GoodRx or be marketed against it.

Do you have a sense for how often you’re upside down on scripts when a consumer uses GDRX or another coupon?

  • Pretty frequently, but I don’t blame the plans. It’s contracting and wholesale. Despite >$1B in spend per year, we don’t have favorable pricing across most of the organization. For the past 6-12 months, we’ve been much more focused on acute care pricing vs. outpatient drug spend. Small independent pharmacies buy better.
  • There’s a huge opportunity for us to get right-side-up. We need a secondary wholesaler and to be more proactive.
    • Our contact explained how they try to maximize reimbursement from payors by setting the usual and customary (U&C) price above what any payor will pay, otherwise they leave money on the table. If he tries to undercut GDRX, which buys the data and knows the U&C prive, his pharmacies would always lose money. This is why GDRX “has a lane/gap to swim in – we want to lower cost, not U&C.”
    • It’s an operational problem, and when they go to MAC or whatever other pricing scheme, the pharmacies end up underwater a lot; “It’s not GoodRx, it’s [our] fault.”
    • Also, pharmacies tend to look bad because the U&C price is high, so we end up price matching. Unless we have a partnership or create our own coupon card/program, we can’t compete.
      • Price matching is a “behind the scenes thing, and a matching policy is reactive, not proactive.” The patient already knows he/she can get a better price, so our contact’s pharmacies are not the immediate choice, and pharmacists are left to mitigate the risk of the patient leaving (literally at the counter).
      • GoodRx would not be the partner of choice because of how it earns money on transaction fees. A more transparent partner would be ideal – e.g., one that does not take such big fees per-script based on the PBM contractual rate(s).
  • “We need a program to talk to patients about – Walgreens has one, CVS too, everyone has them.” If it’s a program, people opt-in. We can’t price fix b/c it’d be like charging Bill Gates $100 for a burger at McDonalds just because you know he’s Bill Gates.

Your volume is ~5MM scripts annually, do you have a sense for often a patient/customer tryies to use a coupon/coupon app?

  • Yes. It’s about 50% of cash pay, and when you segment down to HDHP customers, those people will shop.
  • Cash pay is about 20% of the total, with about half of that uninsured or people who choose not to use their drug benefit (that does happen).
  • About 80% of scripts are generics, and mostly Medicare/Medicaid because of mix. The % using discount cards is 5% or less (usually in donut hole).

Drug discount card growth?

  • More people have been opting for HDHPs, and there’s more cost on the Rx side than anywhere else. So, people are looking for deals more. The market is growing, for sure.
  • Unit volume of drug discount card transactions has been growing HSD% - GDRX has the lion’s share.
  • In ‘21 or ‘22, coupon use growth should still be MSD% - HSD%.

What sort of impact does GoodRx – or do these coupons – have on the pharmacies? And, are you considering a program?

  • Given the claim fee and MAC/AWP minus pricing, it pushes a lot of the generics underwater. $1 or $2, get MACed w/ dispense fee, cost of labor, vials/packaging, software, etc.
  • Yes, for two reasons:
    • I want to have a proactive strategy vs. reacting to GDRX or matching Walmart's price. If a patient goes to one of our providers, I want our people to be confident sending the patient to our pharmacy because we are a lower cost alternative.
    • With 340B drug pricing, we can pass that savings on in the form of lower prices via a coupon.

Who is the average GoodRx customer? How’s the demographic changing, if it is?

  • Medicare members with donut hole exposure. HDHP members.
  • Patients with fewer scripts per year (2-3, non-chronic) or one-offs tend to be a high % of coupon activity (best guess = 40%).
  • Patients needing more/chronic meds usually go with PPOs or plans w/ better Rx coverage.

Thoughts on real-time benefit? Potential impact on GDRX?

  • Providers want to be able to give something like Rx coupons to patients b/c it's an immediate win. GDRX has done a great job with and positioning itself to “help” with this.
  • RTB will help drive formulary decisions for those PBMs, as things immediately goes to first tier; however, the drug(s) could still be expensive. RTB doesn’t impact cash patients, which is the space GDRX is playing in, so there shouldn’t be a huge impact.
    • Note, this contrasts with our initial field work, as the industry veteran thought RTB might afford GDRX an opportunity to entrench itself at the PoC when a script is written.

How valuable is having HeyDoctor built into the offering for GoodRx?

  • During the height of the pandemic, having a link to patients was key. There was larger, quicker adoption than people were expecting; however, some studies showed that there were fewer new starts on medications w/ virtual care (vs. in-person). Retail is ~80-85% of the way back to pre-COVID levels (down about 20% at its worst).
    • Specialty was flat, but the institutional pharmacy business – e.g., LTC – is “in the toilet.” There were no admits, and this segment has been slowest to rebound.
    • Doctors’ offices have rebounded quickly – the hybrid model has led to many clinics returning to full capacity on a rebounding quickly. Telehealth is important – we used some Google Meet, Amwell, and a couple of others to drive productivity back to the same levels due to the combination of virtual and in-person.
      • 30% virtual now – was upwards of 70%, but seeing the same number of patients in total.
      • For GoodRx, it makes sense for simple follow-up, refills, etc.

Who pays the GoodRx fee?

  • Right now adjudicate claim at $13, $10 acquisition cost, the patient pays $13 if using GDRX because of the contracted rate w/ the PBM, which is materially below the U&C price. The pharmacy then pays a transaction fee. “It’s like we’re paying 25 cents to fill the Rx underwater.”
  • The PBMs are never transparent. They might MAC the fee at $13 but charge the payor a much higher price – run the transaction at $13, charge the employer AWP-X, keep the rebates, etc.

How does supply/demand for the flu vaccine look?

  • The supply side is the same for us – there are always shortages early on, but we get priority. From an overall health care standpoint, there’s a big push via messaging, advertising, etc. for people to get the flu vaccine this year. We don’t want the flu and COVID overlapping. Compared to last year, we’re definitely seeing higher vaccination rates in our pharmacies.

Thoughts on UNH buying divvyDOSE?

  • Interesting because divvyDOSE has some additional provider-related benefits – Star measures that help with quality beyond the adherence packaging. The monitoring programs help to drive quality. I think it’s a different niche than PillPack.
  • PillPack is more of a distribution play, in my opinion. A potential high volume solution for retail, and given Amazon’s distribution strategy/capabilities, there’s the potential to get into patients’ homes at a very low cost. DivvyDose does the same packaging but doesn’t have the distribution capabilities (for them to fill and ship it’s way more expensive). But, UNH diving into other parts of health care, medical groups, etc.

Could Amazon be a buyer of GDRX?

  • Remember, Amazon tried to poach a senior executive - John Lavin, who negotiated with retail pharmacies on behalf of CVS Caremark - from CVS last year but was blocked by a judge. They need a PBM to vertically integrate. I don’t know how Amazon will do it, but they will find a way.
    • As an aside, Lavin’s non-compete was 18 months, and he accepted the position w/ Amazon/PillPack in April ’19.

Thoughts on other high-price drugs? Could we see a coupon on something like Exparel for use in orthopedic procedures?

  • Good question. From a clinical perspective, drugs like Exparel and Ofirmev cost the system a lot of money and the clinical data just isn’t there to justify it, in my opinion. Many surgeons like it, but where’s the data to back it up?


Look out for our next set of field notes which will recap our September 30, 2020 discussion with an executive at a national chain who echoed the sentiment on in-house coupon programs vs. GDRX. He also offered constructive views on the evolution of the pharmacy industry and UNH’s acquisition of divvyDOSE.  

All data available upon request. Please reach out to  with any inquiries.

Thomas Tobin
Managing Director


William McMahon


Justin Venneri
Director, Primary Research