#1045 2011 · GoodRx · Healthcare / pharmacy
GoodRx made drug-price comparison free and billed pharmacy benefit managers instead
the problem
Cash patients couldn't see insurers' negotiated discounts, so they paid full retail without knowing better rates existed
background
Pharmacy benefit managers negotiate discounted drug prices with pharmacies on behalf of insurers, but those negotiated rates were invisible to anyone paying cash — the same medication could cost wildly different amounts at two pharmacies a block apart, and uninsured or high-deductible patients had no tool to compare them. Founders Doug Hirsch and Trevor Bezdek saw a patient with no way to shop for a price that already existed somewhere in the system, just not for them.
Charging patients a subscription or lookup fee to access pricing information would have reproduced the same barrier GoodRx was trying to remove — people avoiding a cost-comparison tool because using it cost money defeats the purpose. GoodRx needed a way to surface real negotiated prices to cash-paying patients without charging the patients for the privilege of finding them.
what everyone would do
Charge patients a subscription or per-lookup fee for access to comparative drug pricing, the standard way a new information service recoups its costs, which would have kept exactly the price-sensitive, often uninsured patients GoodRx was trying to help from ever using it.
what they saw
The discount already existed inside the PBM's system; patients just couldn't see it. Routing a cash purchase through the same claims pipeline insurers used let a patient reach the rate that was already there.
the move
GoodRx built a free platform aggregating PBM-negotiated pricing across more than 70,000 pharmacies, letting any patient pull up a coupon and pay the discounted rate at checkout. When a patient uses a coupon, the pharmacy processes it through the PBM as if it were an insured claim, and the PBM shares a portion of its processing fee with GoodRx.
why it works
The mechanism works because it doesn't create a new discount, it exposes one that the PBM was already generating revenue from processing — GoodRx is paid a slice of a fee the PBM was already collecting, not a new charge layered onto the patient's purchase. Because the patient's transaction now flows through the PBM's claims system exactly like an insured purchase would, the PBM has no added cost to serve a cash customer this way, which is what makes sharing a portion of the fee with GoodRx economically painless for them.
the payoff
Profitable since 2013, GoodRx reached a $2.85B valuation and says it has saved consumers over $20 billion cumulatively.
where it breaks
It requires an intermediary already collecting a processing fee large enough to share a slice of without needing a new revenue source, which works for PBMs but wouldn't work in a market with thinner margins on each transaction. It also depends on that intermediary tolerating a tool that reveals price variation across sellers — an industry with more concentrated pricing power could simply refuse to participate in the pipeline the way pharmacies and PBMs did.
what came after
GoodRx proved that transparency itself could be monetized by the intermediaries who controlled pricing rather than by the patients who benefited from seeing it, a structure now widely studied in health-policy research on drug pricing.
references
- [1]How GoodRx built a $2.8 billion business by helping consumers find drug discountsCNBC (via Spectrum Equity), 2020spectrumequity.com
- [2]Characteristics of Prescription Drug Fills Using Pharmacy-Pharmacy Benefit Manager Discount Programs: The "GoodRx" ModelScienceDirect, 2023sciencedirect.com