GoodRx Acquisition Shows Strong 1Q Performance, May Disrupt PBM Business

Prescription drug shopping app GoodRx, Inc.’s 2021 is off to a good start, with strong growth in its first publicly traded quarter yielding enough liquidity for the startup to purchase one of its competitors, RxSaver, for $50 million in cash. Experts say the deal and the company’s strong results are proof that it is here to stay, regardless of how retail giants like CVS Health Corp. and Amazon.com Inc. try to shake up the prescription drug market.

GoodRx reported 20% revenue growth year over year for the first quarter of 2021 and 9% growth in prescription volume. It acquired health and wellness video production company HealthiNation in April.

GoodRx gives consumers more transparency and notable savings in point-of-sale drug prices, but critics have pointed out that the company’s model doesn’t address the ballooning list price of prescription drugs by allowing consumers to circumvent the rebate system — and may even contribute to list price growth in the long run.

Ge Bai, Ph.D., an associate professor at Johns Hopkins University’s Carey Business School and Bloomberg School of Public Health, says the RxSaver deal is evidence that GoodRx has promising prospects.

“This is a sweet deal,” Bai says. “They’re crushing their competitors.” She observes that RxSaver is “very affordable” for a firm of GoodRx’s size, and says that the deal seems to be a play by GoodRx to further expand its market share.

GoodRx Chief Financial Officer Karsten Voermann said during a May 14 earnings call with investors that “we bought them because we are excited about the capabilities they provide for us,” according to a transcript of the call prepared by the Motley Fool.

When asked by SVB Leerink analyst Stephanie Davis about what exactly those capabilities are, Voermann explained that the “acquisition allows us to extend our reach and prescription transactions by adding a small consumer base and a brand that’s known and resonates with a subset of consumers.”

“The company has a talented team and knows the prescription transaction space well. We think they’ll be highly complementary to GoodRx,” Voermann said. “We intend to keep the brand and believe there are some marketing channels and such that they have used that are potentially things that will be helpful broadly for GoodRx.”

GoodRx Will Expand Capabilities

Ashraf Shehata, national sector leader for health care and life sciences at KPMG, says he expects GoodRx will disrupt PBM rebating as it consolidates its position.

“I think the idea is that GoodRx can expand these capabilities into a broader portfolio,” he tells AIS Health. “You can use these consumer platforms in a much broader place. GoodRx was able to do area mapping, and they would see who has vaccine availability, who had some open spots. So they use some of their consumer tools to make a much broader visibility of something that’s really interesting to them.”

He says GoodRx could expand its contracting reach to disrupt the PBM business itself by going direct to consumers — not just operating at the outer margins of the drug channel.

Shehata can see a future where GoodRx “is more like a PBM model, where they’re going to offer kind of extended, membership-like services. One of them is going to be a point-of-care model. Some of them are literally sold right there at the pharmacist on the front end. And then this web front end. So to me, it’s now going to be a combination of all of these things. I think you’re going to see more of these kind of direct-to-consumer pharmaceutical products that are not directly a PBM infrastructure, but more of a program where you can afford direct-to-consumer rebating.”

Conversely, Shehata says, “I think PBMs are trying to become much more consumer friendly.”

He adds that GoodRx’s success shows that “there seems to be a pretty good category of individuals who may not have a very robust pharmacy benefit that would be very interested in having any kind of a retail-based [discount program].”

Some observers have speculated that GoodRx’s increasing clout in retail pharmacy will be threatened by retailers like Amazon.

On May 26, Business Insider reported Amazon is considering opening brick-and-mortar pharmacies. Evercore ISI analyst Elizabeth Anderson reported in an investor note on the same day that “the announcement about entering a new market has driven a sell-off in the relevant space.”

Some observers outside the industry have pitched Amazon as a potential competitor to GoodRx and even PBMs. Anderson has a different take — as do Bai and Shehata.

“While a new, large, competitor is not something to entirely brush off, we note that AMZN has been in pharmacy since 2018 with their acquisition of PillPack and… has not gained much market share,” Anderson wrote.

“They appeal to different types of customers,” Shehata observes.

He sees Amazon’s pharmacy offerings as an integrated part of the company’s expanding telehealth and home care offering. He believes that Amazon wants to include a pharmacy fill as a seamless part of any given care encounter, but doesn’t necessarily stack up as a disruptor for maintenance medications like GoodRx.

“I haven’t seen any important, consequential moves from Amazon Pharmacy so far,” says Bai. “And they have their failures. Amazon has done a lot of wrong moves — it’s not like they always succeed. So I don’t see a meaningful threat at this point.”

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