How GoodRx Repelled Amazon

GoodRx has expanded its offerings for subscribers and pharmaceutical companies.

A year ago this month, Santa Monica-based GoodRx Holdings Inc. and its prescription drug price comparison app went public, causing a stir as one of the few profitable companies to make an initial call. public savings.

In the year that followed, GoodRx and its consumer-centric healthcare apps managed to hold their own and even thrive despite the growing threat of a prescription drug rebate program launched by the giant. from Inc. e-commerce at the end of last year.

GoodRx took advantage of a rebound in consumer prescriptions, leveraged public education agreements with pharmaceutical manufacturers, and began to capitalize on its diversification strategy.

The company’s most recent quarterly profits have seen gains in revenue and the number of monthly customers and subscribers. Revenue of $ 177 million increased 43% from the second quarter of 2020, while the number of monthly customers rose 36% to 6 million and the number of subscribers jumped 86% to 1.05 million.

These increases follow slightly lower percentage gains in all three measures for the first quarter and for the full year of 2020 compared to 2019.
GoodRx’s strong revenue performance “is driven by a strong recovery in prescription volumes,” SVB Leerink analyst Stephanie Davis said in her latest report after the company’s earnings release last month. “Management expects this trend to continue to improve throughout the year.”

Revenue growth has been slow to translate into increased profits, mainly due to huge IPO-related payouts to co-founders and co-CEOs Trevor Bezdek and Doug Hirsch. While payments of over $ 500 million will come through stock awards over time, the company recorded the bulk of the payments in the fourth quarter, resulting in a loss of nearly $ 300 million. of dollars. There was also a fallout in the first quarter of this year, when the company recorded just $ 1.7 million in profits.

It wasn’t until the second quarter that the weight of payments over earnings fell enough to show a more typical net profit of $ 31 million.

As for stock performance, the shares closed on September 13 at $ 44.22, down about 12% from the $ 50.50 per share that closed on the first day of trading on September 21, 2020. But much of that drop came after a pair of Amazon announcements. on its prescription drug rebate program.

In November, the Seattle-based e-commerce giant launched a prescription drug rebate program called PrimeRx. This caused GoodRx’s share price to drop 28%, with investors worried that Amazon’s deep pockets and huge reach could crowd out GoodRx’s prescription drug application. Then, in May, Amazon announced expanded comparison pricing options with its discount card, which in turn lowered the GoodRx share price by 4%.

After each Amazon announcement, Bezdek and Hirsch said that Amazon’s program does not compete directly with GoodRx. Hirsch repeated it last week.
“Amazon is a pharmacy while GoodRx is the whole market,” Hirsch said.

Model a marketplace
The GoodRx prescription drug market got its start ten years ago when Hirsch, a former Facebook Inc. executive who was in the insurance business at the time, backed down from paying $ 450 – even with his card. insurance – for a single prescription at their local pharmacy. .

According to a letter he and GoodRx co-founder Bezdek wrote to preface the recording of last year’s public offering, Hirsch decided to take the tour. He found the same prescription drug for as little as $ 250 at another pharmacy and learned how prescription drug prices can vary.

It was then that he decided to team up with his veteran tech friend and colleague Bezdek to create a platform to help consumers find the lowest prescription drug prices in their area. . And so, GoodRx was born in 2011.

The company now has the ability to price drugs at 70,000 drugstores in the United States. He earns money from the fees he charges, either on individual prescription purchase transactions or from drug benefit managers.

GoodRx is also making money on subscriptions that offer customers prescription discount cards and through an agreement to operate a drugstore discount card service for Cincinnati-based supermarket retailer Kroger Co.

But its fastest growing segment is a set of arrangements with 19 of the top 20 pharmaceutical companies to enable them to educate patients and consumers about drugs.

discount programs sponsored by manufacturers for their prescription pharmaceuticals. When a consumer searches for a specific drug that qualifies for one of these programs, a sponsored, clickable dialog box appears to inform the consumer of the potential savings from the program.

This segment increased its sales by almost three times in the second quarter compared to the same period last year.

Diversification push
GoodRx began to expand beyond prescription drug services with its acquisition in late 2019 of the San Francisco-based, physician-founded, San Francisco-based telemedicine app HeyDoctor. GoodRx slowly integrated HeyDoctor into its operations, adding functionality and renaming it in March of this year as GoodRx Care.

This was the first step in GoodRx’s new strategy to become a diverse consumer-centric healthcare technology platform. Armed with cash from its public offering, GoodRx acquired two digital health companies earlier this year.

The first was New York-based HealthiNation Inc., operator of an online healthcare video library, with the goal of giving consumers access to information on nutrition, healthy lifestyles and ailments. or chronic diseases.

The other deal was to buy the competing platform, RxSaver, from San Antonio, Texas-based Vericast Corp., a payments and marketing company controlled by billionaire Ronald Perelman.

Last month, GoodRx reached an agreement with Surescripts, an Arlington, Va.-Based health information network, to provide drug price information to doctors and other prescribers through electronic medical record systems.

Also last month, GoodRx entered the insurance business through a partnership with Chicago-based GoHealth Inc., a health insurance marketplace and digital health company focused on health insurance. The partnership initially allows GoodRx to guide its senior clients to the most suitable and affordable Medicare Advantage plans.

“People’s insecurity is one of the biggest weaknesses in health care,” Hirsch said. “And a lot of people don’t know how to get insurance or don’t use their existing insurance as effectively as they could. This partnership aims to contribute to it.
This diversification push has impressed analyst Davis and fellow analyst Charles Rhyee of New York-based Cowen Inc.

“We like GoodRx’s strategy of expanding into complementary markets with high growth potential, such as its pharmaceutical manufacturing solutions and telehealth offerings,” said Rhyee.

He noted that, as with any business that relies on subscriptions and website visits, GoodRx faces the risk that the pace of new subscriptions slows or that its telehealth rollout may not generate as much interest as hoped.

Meanwhile, GoodRx co-managing director Hirsch said more deals are expected in the coming quarters.

“We have a slew of new product offerings for consumers over the next six months, all aimed at addressing several other issues consumers face in obtaining health care,” he said.

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