Cartoony high hospital bills, overpriced prescription drugs, crowdsourcing for medical treatments – these are all features of the American health care system that have become all too familiar to many Americans. They are the everyday expressions of a popular refrain: the health care system is broken.
That’s a problem Doug Hirsch, CEO of the prescription drug discount platform GoodRx, wants to solve, or at least lighten the financial burden of buying drugs.
The Inflation Reduction Act, passed in the Senate earlier this month, includes several health care reforms, one of which will allow Medicare to negotiate the price of 10 prescription drugs starting in 2026. It’s a provision that will do the same. problem that GoodRx wants to solve for patients. But Hirsch says the policies “aside from a massive rewrite of the health care system” won’t affect the company’s operations. Anything less than a total overhaul of the status quo means GoodRx can keep its $745 million business running, he says.
Before starting GoodRx, Hirsch worked at Facebook and Yahoo alongside two notable Marks: Zuckerberg and Cuban, respectively. He says those experiences helped him see healthcare as a complex consumer business problem ripe for disruption and new solutions. “The correct answer is knowing how to talk to a consumer like a consumer, not a patient,” Hirsch says.
GoodRx prides itself on forming strong relationships with the various players in the pharmaceutical industry – and there are many. Major retailers like CVS and Walmart accept GoodRx coupons, and the low-cost drug company offers drug companies ads on its platform, helping them reach its 5.8 million monthly users. It also works with pharmacy benefits managers (PBMs), the shady entities that negotiate drug prices between manufacturers and retailers and determine which drugs are covered by insurance plans. This openness to work within the industry is all part of Hirsch’s ethos to “work with anyone who can give a consumer a better price” within the complex US health care system.
But the $384.4 billion maelstrom in drug prices has served as a financial boon for GoodRx, especially as Americans cut spending in response to skyrocketing prices for daily necessities and look for cheaper alternatives to necessary purchases like drugs. GoodRx revenue grew 17% to $395 million in the second quarter of this year, compared to the same time last year.
In America, which has the highest spending on prescription drugs in the world, it’s easy to see why providing access to affordable drugs is such an attractive venture. So much so that new competitors are entering the market, including Amazon and Mark Cuban’s Cost Plus Drug Pharmacy. Hirsch says he’s not worried about these newcomers because their focus is on mail-order delivery, while GoodRx still prioritizes brick-and-mortar pharmacies. “It’s been a long time and as far as I know people are still going to CFS,” Hirsch says.
That doesn’t mean GoodRx isn’t diversifying its business when it looks to the future. The company has made a concerted effort to expand into telehealth, which Hirsch says is about “affordability and access”.
This article has been edited and condensed for clarity.
Fortune: You have a technical background. How does that influence your view on healthcare?
Hirsch: Even though I’ve been working in healthcare for about 15 years, I like to think of myself as a novice. So what I use regularly is the same skills I had at Facebook and Yahoo, which is trying to build products that consumers can understand, especially people who might be lower on the technology curve, who might even struggle to figure it out. how to use a smartphone. I spend a lot of time at GoodRx building analogies between healthcare and other purchasing decisions people make. If I can figure out how to buy airline tickets online, maybe I can figure out how to find a doctor.
You have a co-CEO model. Does it actually work?
I don’t recommend it to anyone, and yet it’s the best thing that ever happened to me. My Co-Founder and Co-CEO [Trevor Bezdek] and I met through our mothers at a holiday breakfast. We had opposing interests. It makes for an incredibly valuable relationship because if there was a territorial issue where we both thought we knew more about marketing or whatever, that would be a challenge. The reality is that we are two sides of the same brain. The things he gets excited about aren’t my field or best skills, and vice versa. I like products, talking to people and being the public face of the company. He is very enthusiastic about business development and finance.
It’s also good, because as an entrepreneur you constantly doubt yourself and you have someone by your side during this process. It is such a difficult experience to start a business. It’s all-consuming, it’s 24/7. Every day you think the world is going to end, and to have someone you can trust completely and make these life-changing decisions that happen almost weekly is good. It’s like having a partner at work. Besides, my PR person laughs at me for saying that.
Amazon and Mark Cuban’s discount pharmacy have entered this space. Could they pose a threat to GoodRx?
I would say 100% no. As an entrepreneur, you are constantly thinking about who is trying to eat your lunch and who is outsmarting you. The reality is that 12 years later, the competition is made up of people who don’t know any better. The competition is made up of people who assume that the US health care system is working in their favor, and that they don’t have to do anything, and that they can just be passive. It’s really interesting how poorly understood healthcare is in this country. The math that most reporters seem to do — and I say this kindly — is, ‘Oh my god, Amazon destroyed those other industries because they did mail order, they’re going to destroy healthcare because they know mail order.’ That’s not how healthcare works.
Amazon has been playing in online mail with drugstore.com since 2010, when they bought PillPack. As far as I know, people still go to retail pharmacies and still go to the doctor in person. There hasn’t really been that disruption that everyone is talking about, even with a global pandemic where people couldn’t leave their homes.
Mark Cuban, who I used to work with at Yahoo, is a great personality and I admire what he tries to do. I never want to turn down a competitor, but I don’t think another mail order pharmacy saying they’re going to sell cheaper drugs is the right answer.
Okay, so what’s the correct answer?
I think the correct answer is knowing how to talk to a consumer as a consumer, not a patient. If you are thoughtful, you can try to change the way consumers act. We have millions of people using GoodRx every month who have learned that they can use discounts to actually get better prices than insurance. We need to bring about these kinds of behavioral changes in consumers, not just flip a website and hope for the best.
Why do drug manufacturers charge such high prices, or higher prices than yours, but also have a good relationship with a company like GoodRx that offers coupons to lower those prices?
Pharmaceutical pricing is really very complicated. I’m not saying this because I’m trying to make excuses for the pharma. The way drugs are priced in this country is so incredibly complicated and silly. I don’t think the pharma expects people to spend $6,000 or $60,000 on a drug. Because of the incredibly complex contracts that manufacturers have with insurance companies and the government, you end up in a kind of artificially high situation where you have to set these incredibly high prices so that they can work within the system we designed. Let’s be clear that that’s too much for drugs.
I just want to be careful that just because you read a headline that says a drug costs a million dollars, it doesn’t necessarily mean that a consumer will pay a million dollars out of pocket or an insurer will pay a million dollars. It’s incredibly complicated and broken. When people ask me who the enemy is here, I really think we just have a system that’s designed completely wrong. You have drug manufacturers that are profitable companies with shareholders. You have insurers that have shareholders. You have hospitals and you have doctor groups. Everyone is trying to maximize profits and work within this incredibly complex, public-private mess that we have.
That’s my long way of saying we’re a company built on trying to give consumers a fair price. We decided a long time ago to partner with anyone who can give a consumer a better price. So we’ll work with doctors, we’ll work with pharmacies, and we’ll even work with pharmaceutical manufacturers who are willing to offer patient-assistance programs, or co-pay cards, or some other resource so that a consumer can find an affordable price.
What would the prescription drug pricing provisions in the Inflation Reduction Act mean for GoodRx?
The point is, very little. I applaud our government for taking a very small baby step to ease the pain US consumers are feeling. But to break it down into a few bits:
By 2026, only Medicare — not commercial insurance — will have the ability to negotiate 10 drugs. That’s four years from now, and then eventually they’ll be able to do a few more. So, yay to the bargaining, but I’ll be much older by the time we make real progress there.
Second, a $35 limit on insulin is great except for most commercial insurance and I think Medicare already covers about $35.
Then there’s the $2,000 out of pocket. My understanding is that there are about 64 million Medicare recipients and about 800,000 of them have actually reached that catastrophic coverage limit ($7,050). Only about 2% of Medicare recipients will get relief from that.
If there were ever a bill that would allow Medicare to negotiate all consumer drugs, what would it do to GoodRX?
Medicare is only part of the population, so I don’t think it would have a huge impact on us. I don’t foresee a situation, other than a massive rewrite of the healthcare system, that would have a dramatic impact on GoodRx’s business.
You recently bought a number of telehealth companies and launched GoodRx Care. It seems to me that you saw something in telehealth before the pandemic.
Our view of telehealth is a bit different from most other companies (Roman, Hymn). We’re just trying to make doctor’s visits more affordable and accessible to consumers. The other companies are focused on having an online experience that leads to a product that you buy through them. In our case, we focus on how to get consumers to a doctor when they are short on time, or if they have two jobs or children. It’s all about accessibility.