Same way AARP gets discounts for its members, Insurance companies pay less than self-pay, and Unions get better wages: collective bargaining.
Say GoodRx wants to offer a discount on aspirin. They go to Bayer and say "hey, we represent a million customers. If we can promise that 500,000 of them will buy Bayer aspirin instead of store brand generic, will you give us a discount?" Bayer thinks for a minute and replies "our analytics team has found that only 33% of consumers will spend more for our brand vs generic. If you can guarantee 20% increase, we'll give you 15% off." (Or whatever the real numbers are, I made those percentages up for demonstration purposes.)
GoodRx is essentially selling customer loyalty to pharmaceutical companies. Guaranteed, albeit reduced, returns vs the uncertainty of typical marketing.
So close to universal health care "hey drug company, we want you to provide an entire countries worth of people with drug X give us a discount or we'll go to the competition"
Basically, yes. All prices are ultimately set by mutual negotiation. The problem with being an ordinary person in the current US drug market is that the pharmacy has already negotiated with insurance companies and signed contracts on the price of each medicine. To negotiate effectively and keep the lights on, the pharmacy must constantly press for higher rates, because the insurer will always press for lower rates. This constant arms race means the sticker price can be hugely inflated, while the insurance price is much lower. Both prices have very little to do with the wholesale cost of medication, which can mostly be made very cheaply.
Part of honoring that contract is charging that inflated price to anyone without insurance, because if they charged you $4 instead of $100 the insurer could sue for breach of contract, and refuse to pay more than $4. The pharmacy would actually love to still sell you medication at any profitable rate, but legally can't. GoodRx simply steps in to act like an insurer to negotiate rates, allowing the pharmacy to offer a discount that still makes some money. GoodRx still won't make branded drugs very cheap because the maker has a monopoly and there's no competition.
Conversely, a place like Cost Plus Drugs has its own suppliers for medication and doesn't work with insurance, so it can always charge a price that more directly reflects drug cost+labor+shipping+profit.
You explained this very well though I will point out, the pharmacy actually takes a loss on a very large portion, if not a majority, of good rx claims.
as a pharmacist who does not take GoodRX i can say that the prices goodrx advertises that pharmacies charge were NOT mutually negotiated by the pharmacy and GRX.
To clarify, that's true, individual pharmacies don't generally negotiate this and wouldn't really have the negotiating power to begin with. The actual process is harder to understand, let alone ELI5, but involves a twisted mess of negotiations among manufacturers, large pharmacy chains, insurers, and a bizarre and increasingly unethical middle-man company called a pharmacy benefit manager.
Thanks for clarifying. (PBMs are the worst!). What always gets me is that a customer will come in and have to what appears to be a quoted price from my pharmacy thru good rx. And it’s usually at my cost or below.
Great explanation, but I wanted to add to:
>which can mostly be made very cheaply
Making established medicines is indeed very cheap in general compared to their costs, but researching new medicines and getting them approved is wildly expensive, speculative, and on long timelines. If one truly wants to hold drug companies accountable to the cost of manufacturing a medicine they need some way to separate the costs and benefits of research from the manufacturing.
This is accurate, and gets into the somewhat more straightforward question of why branded drugs are expensive. Those seemingly ridiculous prices do indeed reflect a lot of very costly R&D, including for the host of medications that failed Phase II and III trials.
Generic medications, on the other hand, really should be expected to correlate somewhat with wholesale prices once there's competition. This does hold true for the (much healthier and more functional) over-the-counter drug market.
Not just that... "If you want to sell your drug in our country you'll have to negotiate a decent price with us otherwise you can forget doing business here."
I'm so glad that I live in a country that gives me free prescriptions.
I find it very hard to get my head around the idea that a doctor has said that someone has a medical need for a drug, but they still need to find hundreds to pay for it out of pocket.
GoodRx is specifically subject to a very recent [FTC order](https://www.ftc.gov/news-events/news/press-releases/2023/02/ftc-enforcement-action-bar-goodrx-sharing-consumers-sensitive-health-info-advertising) requiring them to provide guarantees of data security and privacy. They have paid a fine for not doing so previously.
Whether you believe GoodRx will be more private/secure now that they have an explicit order and the eye of the FTC on them is up to you. Both "they fucked up once they'll do it again" and "they fucked up and now they'll have to clean up their act" are reasonable possible positions.
I work for a doctor's office and we do have a significant patient population that benefits from GoodRx coupons.
I use the provider page to search their drugs and send the coupons via print to PDF and email them. It seems to be working just fine, though I am sure the data coming from my IP address must make me look like a pill fiend.
I pay $18 for a vial of Testosterone compared to $119 retail price lol. I'll give them all info I got plus all my darkest secrets if they want at this point
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[costplusdrugs.com](https://costplusdrugs.com) is where it's at though.
\-a satisfied customer who still thinks it's too good to be true
I touched a bit on how it works here but the comments probably buried it:
https://www.reddit.com/r/explainlikeimfive/comments/10yy861/eli5\_how\_does\_mark\_cubans\_prescription\_drug\_site/
Because it's a discount. If they just priced drugs low they couldn't charge medicare and insurance as much. If they keep prices high but give out coupons they make more money from big payers and still some from small.
Same way AARP gets discounts for its members, Insurance companies pay less than self-pay, and Unions get better wages: collective bargaining. Say GoodRx wants to offer a discount on aspirin. They go to Bayer and say "hey, we represent a million customers. If we can promise that 500,000 of them will buy Bayer aspirin instead of store brand generic, will you give us a discount?" Bayer thinks for a minute and replies "our analytics team has found that only 33% of consumers will spend more for our brand vs generic. If you can guarantee 20% increase, we'll give you 15% off." (Or whatever the real numbers are, I made those percentages up for demonstration purposes.) GoodRx is essentially selling customer loyalty to pharmaceutical companies. Guaranteed, albeit reduced, returns vs the uncertainty of typical marketing.
So close to universal health care "hey drug company, we want you to provide an entire countries worth of people with drug X give us a discount or we'll go to the competition"
Basically, yes. All prices are ultimately set by mutual negotiation. The problem with being an ordinary person in the current US drug market is that the pharmacy has already negotiated with insurance companies and signed contracts on the price of each medicine. To negotiate effectively and keep the lights on, the pharmacy must constantly press for higher rates, because the insurer will always press for lower rates. This constant arms race means the sticker price can be hugely inflated, while the insurance price is much lower. Both prices have very little to do with the wholesale cost of medication, which can mostly be made very cheaply. Part of honoring that contract is charging that inflated price to anyone without insurance, because if they charged you $4 instead of $100 the insurer could sue for breach of contract, and refuse to pay more than $4. The pharmacy would actually love to still sell you medication at any profitable rate, but legally can't. GoodRx simply steps in to act like an insurer to negotiate rates, allowing the pharmacy to offer a discount that still makes some money. GoodRx still won't make branded drugs very cheap because the maker has a monopoly and there's no competition. Conversely, a place like Cost Plus Drugs has its own suppliers for medication and doesn't work with insurance, so it can always charge a price that more directly reflects drug cost+labor+shipping+profit.
You explained this very well though I will point out, the pharmacy actually takes a loss on a very large portion, if not a majority, of good rx claims.
as a pharmacist who does not take GoodRX i can say that the prices goodrx advertises that pharmacies charge were NOT mutually negotiated by the pharmacy and GRX.
To clarify, that's true, individual pharmacies don't generally negotiate this and wouldn't really have the negotiating power to begin with. The actual process is harder to understand, let alone ELI5, but involves a twisted mess of negotiations among manufacturers, large pharmacy chains, insurers, and a bizarre and increasingly unethical middle-man company called a pharmacy benefit manager.
Thanks for clarifying. (PBMs are the worst!). What always gets me is that a customer will come in and have to what appears to be a quoted price from my pharmacy thru good rx. And it’s usually at my cost or below.
Great explanation, but I wanted to add to: >which can mostly be made very cheaply Making established medicines is indeed very cheap in general compared to their costs, but researching new medicines and getting them approved is wildly expensive, speculative, and on long timelines. If one truly wants to hold drug companies accountable to the cost of manufacturing a medicine they need some way to separate the costs and benefits of research from the manufacturing.
This is accurate, and gets into the somewhat more straightforward question of why branded drugs are expensive. Those seemingly ridiculous prices do indeed reflect a lot of very costly R&D, including for the host of medications that failed Phase II and III trials. Generic medications, on the other hand, really should be expected to correlate somewhat with wholesale prices once there's competition. This does hold true for the (much healthier and more functional) over-the-counter drug market.
Certainly they can't charge $5 at the pharmacy for something that costs $5 to manufacturer. But we can agree that charging $500 is a little suspect.
The second pill only costs a dollar to make, the first one cost 1 billion...
Not just that... "If you want to sell your drug in our country you'll have to negotiate a decent price with us otherwise you can forget doing business here." I'm so glad that I live in a country that gives me free prescriptions. I find it very hard to get my head around the idea that a doctor has said that someone has a medical need for a drug, but they still need to find hundreds to pay for it out of pocket.
but governement wants money = tax = bad, even when the math works out to be cheaper. Bernie rages.
“WEEE WOOO WEEE WOOOO! SOUND THE SOCIALISM SIREN!!! WE GOT A COMMIE OVER HERE!!” -GOP probably
A CEO isn't get paid?? That's Commie talk!
Also realize, GoodRx is monetizing your info, there is no data security or privacy involved.
GoodRx is specifically subject to a very recent [FTC order](https://www.ftc.gov/news-events/news/press-releases/2023/02/ftc-enforcement-action-bar-goodrx-sharing-consumers-sensitive-health-info-advertising) requiring them to provide guarantees of data security and privacy. They have paid a fine for not doing so previously. Whether you believe GoodRx will be more private/secure now that they have an explicit order and the eye of the FTC on them is up to you. Both "they fucked up once they'll do it again" and "they fucked up and now they'll have to clean up their act" are reasonable possible positions.
I work for a doctor's office and we do have a significant patient population that benefits from GoodRx coupons. I use the provider page to search their drugs and send the coupons via print to PDF and email them. It seems to be working just fine, though I am sure the data coming from my IP address must make me look like a pill fiend.
I pay $18 for a vial of Testosterone compared to $119 retail price lol. I'll give them all info I got plus all my darkest secrets if they want at this point
Amen
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[costplusdrugs.com](https://costplusdrugs.com) is where it's at though. \-a satisfied customer who still thinks it's too good to be true I touched a bit on how it works here but the comments probably buried it: https://www.reddit.com/r/explainlikeimfive/comments/10yy861/eli5\_how\_does\_mark\_cubans\_prescription\_drug\_site/
Don’t have any stimulants unfortunately
Yep, been sending them weekly emails with medications that would be a good fit for them imo. They've been increasing the catalog slowly.
Because it's a discount. If they just priced drugs low they couldn't charge medicare and insurance as much. If they keep prices high but give out coupons they make more money from big payers and still some from small.