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Wednesday, Aug 17, 2022

Is Amazon a Threat to GoodRx?

Santa Monica-based GoodRx Holdings Inc. and its comparison price shopping app for prescription drugs are facing increased competition from Amazon.com Inc.

In November, Seattle-based Amazon introduced a prescription discount program called Prime Rx. And in early May, the ecommerce giant edged closer to GoodRx’s turf, announcing expanded comparison pricing options with its discount card.

GoodRx investors didn’t take kindly to these developments, fearing Amazon, which had $386 billion in sales last year, could crush GoodRx, which posted $551 million in revenue last year.

GoodRx shares tumbled 28% after Amazon’s first announcement and another 4% after Amazon’s most recent announcement.

But in an unusual move for a company facing the prospect of competitive pressure from Amazon, GoodRx executives have repeatedly maintained that they don’t see the online shopping behemoth as a threat.

Indeed, they’ve told analysts Amazon isn’t a direct competitor, and even if it were, they argue Amazon hasn’t been very effective in the prescription drug space.

“Based on third-party data and surveys, we’ve observed almost no usage of the PrimeRx retail,” GoodRx Co-Chief Executive Trevor Bezdek told analysts in his company’s first-quarter earnings teleconference call earlier this month.

He added that the stats and surveys indicated Amazon’s prescription drug mail program is a very small portion of overall mail volume.

“So, it’s not necessarily causing any acute impact there that people might care,” Bezdek said. “I think as time passes, people’s concern about Amazon has only decreased,” he said, referencing GoodRx investors.

Was Bezdek merely trying to talk down concerns about a potential threat from Amazon to his company’s core business?

GoodRx rose to prominence on its ability to exploit a little-known aspect of prescription drug pricing: Prices for specific drugs can vary widely among pharmacies. Its platform can scan prices for a specific drug among 70,000 participating pharmacies and come up with a list of pharmacies in proximity to the customer with the cheapest prices for that drug. It’s similar to the website GasBuddy and its ability to locate the cheapest gas stations in a given city.

Analyst support

At least one analyst is siding with GoodRx executives in the belief that Amazon hasn’t really touched GoodRx’s main turf.
“Amazon’s Pharmacy Push Continues, but GoodRx’s Moat Remains Intact,” was the headline of a report that SVB Leerink analyst Stephanie Davis put out after Amazon’s second pharmacy announcement on May 11.

“Despite investor fears of an Amazon-led disruption in the prescription discounting and price transparency space, we note that Amazon’s approach is very traditional in nature,” Davis wrote in her report, which reiterated an over-perform rating for GoodRx. “We believe that GoodRx will dominate the in-person discount pharmacy vertical.”

She said Amazon’s May 11 announcement was more about giving Amazon Prime customers more benefits from its pharmacy discount card, such as the ability to compare the Amazon discount price to a customer’s insurance co-pay for a specific drug, instead of just the retail value of that prescription.

GoodRx also offers a discount card, so Amazon’s discount card can compete directly with GoodRx on that front.

But Amazon’s pharmacy discount card benefits don’t touch what Davis terms GoodRx’s main advantage: its ability to aggregate prices for specific drugs from the 70,000 pharmacies participating in its network.

“GoodRx remains a clear price leader due to its role as an Rx pricing aggregator,” Davis wrote.

But just because Amazon may not be challenging GoodRx’s core business right now doesn’t mean the threat has vanished.

That’s one reason why over the last two years GoodRx has been diversifying with a broader mission of becoming the leading consumer-focused digital health platform. To help carry out that mission, it went public in September, raising $772 million for its own use.

The company’s first expansion push came before that with its September 2019 announcement that it had agreed to buy San Francisco-based physician-founded telemedicine app HeyDoctor. GoodRx has slowly been integrating HeyDoctor into its operations, adding features and rebranding it in March of this year as GoodRx Care.

In January, GoodRx launched a consumer-oriented Covid vaccine guide, with real-time tracking of vaccine inventories at pharmacies and government or hospital-run vaccination sites and then enabling people to set up vaccination appointments. The company in its first-quarter earnings letter to shareholders said that as of May 6, roughly 2 million people had signed up for alerts and updates related to the vaccine guide. 

Recent acquisitions

Armed with cash from its public offering, GoodRx in the first quarter agreed to acquire two digital health businesses. Both deals closed in April. GoodRx did not disclose financial terms for either deal.

The first purchase was New York-based HealthiNation Inc., the operator of an online health care video library. GoodRx’s goal with the pickup is to give consumers access to information on nutrition, healthy lifestyles and chronic medical conditions or diseases.

The other deal was for competitor platform RxSaver, from San Antonio, Texas-based Vericast Corp., a payment and marketing company controlled by billionaire dealmaker Ronald Perelman.

In the earnings teleconference call with analysts, GoodRx’s other co-founder and Co-Chief Executive Doug Hirsch indicated more acquisitions will be coming.

“We believe we see many opportunities in digital health care,” Hirsch said. “We’re really trying to drive telehealth, manufacturer solutions and our core prescriptions offering.”

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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