Published on Feb 27, 2024
Pharmacy benefit managers have launched new partnerships with GoodRx (GDRX), representing yet another tactic aimed at undermining financially strapped independent drugstores, industry experts critical of PBMs’ practices told The Capitol Forum.
Since January 1, four major PBMs—Express Scripts, Caremark, MedImpact and Navitus Health—have embedded GoodRx into their claims adjudication process, forcing pharmacies to accept low reimbursement rates provided by GoodRx for generic drugs. In using the discount company, the PBMs, or agents that insurers hire to process drug claims, may be violating antitrust laws as well as numerous state laws designed to protect independent pharmacies and patients, the industry experts said.
Digital health platform GoodRx was originally designed to give patients access to lower prices when buying prescriptions outside the insurance system. However, independent pharmacies would often refuse to accept it, either because it was uneconomic for them to dispense medications at such low rates or because GoodRx has sold patient data to Big Tech companies.
Now, independent stores are left with no choice but to accept GoodRx’s terms. The four PBMs automatically divert claims to GoodRx, which returns the lowest pharmacy reimbursement rate among those provided by the dozen PBMs it partners with as part of its original discount program. This risks exacerbating an existential crisis currently facing independent pharmacies.
“By using GoodRx to leverage other PBMs’ network contract pricing, each participating PBM colluding in this integrated GoodRx system is now benefiting from network contract prices set by their supposed competitors,” Luke Slindee, senior pharmacy consultant at healthcare accounting firm Myers and Stauffer and an anti-monopoly advocate in Minnesota, told The Capitol Forum. “The end result is several PBMs are now working together to collectively reduce payments to pharmacies.”
“If this isn’t algorithmic price-fixing, I don’t know what is,” he added. Algorithmic price-fixing is a kind of anticompetitive conduct in which collusion on pricing happens not with executives in a smoke-filled room, but with an algorithm crunching numbers on servers.
Slindee compared the PBMs’ use of GoodRx to Agri Stats, an information exchange that’s been accused of allowing meat processors to collude and lower payments to farmers, and which was recently sued in significant litigation by the DOJ’s antitrust division.
In another recent antitrust action involving the practice, RealPage, a real estate data provider, was sued by the District of Columbia Attorney General and, separately, private plaintiffs for allegedly engaging in algorithmic price-fixing by enabling competing landlords to jointly increase rents. Earlier this month, Senator Amy Klobuchar (D-MN) introduced new legislation specifically focused on algorithmic price-fixing in response to the RealPage case.
Before teaming up with GoodRx, PBMs were already under heavy scrutiny not only for driving up brand drug prices but also for leveraging their market power to under-reimburse or otherwise steer patients away from independent pharmacies. Critics allege that conduct by vertically integrated PBMs has led to a wave of closures of independent pharmacies and the proliferation of pharmacy “deserts” across the country, where customers have no local access to a pharmacy.
GoodRx and Express Scripts disputed the characterization of their practices as algorithmic price-fixing. “The program simply surfaces information that is generally publicly available on the GoodRx website or mobile application, but makes it a more seamless experience for the patient,” a GoodRx spokesperson said in an email to The Capitol Forum.
“This premise is categorically false,” an Express Scripts spokesperson said in a separate email. “The discount card rates that patients receive… are rates available through GoodRx, which the pharmacy has already agreed to in their contracts.”
Caremark, MedImpact and Navitus didn’t respond to requests for comment.
Threat to struggling independent pharmacies. To be clear, the partnership between PBMs and GoodRx can result in lower prices for consumers, who often have to pay high out-of-pocket costs for drugs, especially as they make their way through high deductible periods.
But, to get the lower rates, PBMs use the pricing set by their competitors. Benjamin Jolley, a Utah-based independent pharmacist, put it this way: “GoodRx takes the different PBMs, who are effectively a cartel, and turns them into an actual cartel because they’re sharing price information with each other and then paying the lowest price that any PBM pays.”
One lawyer who represents pharmacies in litigation against PBMs also finds it hypocritical that they’re willing to share pricing information with GoodRx at all.
“I have been litigating against PBMs for years and they are fanatical about the secrecy of their pricing,” Mark Cuker told The Capitol Forum in an email. “They even refuse to disclose pricing info to us when protected by court confidentiality orders. I was amazed to hear that they abandon secrecy and freely share pricing information so they can underpay pharmacies in a race to the bottom. This predatory price fixing will squeeze the last drop of blood out of independent pharmacies struggling to survive.”
The GoodRx spokesperson said the PBMs that divert claims to GoodRx don’t have access to the name of the PBM whose price they’re replacing their rates with. The Express Scripts spokesperson also said, “We do not have visibility into the rates of our peers, nor are they involved in our GoodRx program in any way.”
However, Slindee, the pharmacy consultant, noted that the PBMs may be able to determine their competitors’ rates by seeing the amounts that are being applied to their patients’ deductibles. Jolley added that the “BIN” number included on a returned claim may also indicate to the patient’s PBM which other PBM’s price is being used. Regardless, he warned, the primary issue is that GoodRx is allowing PBMs to use each others’ rates when it suits them.
For many drugstores, the new program is a dire threat. One Tennessee-based independent pharmacist, who spoke to The Capitol Forum on the condition of anonymity, described “a substantial uptick in claims being diverted to GoodRx” since the beginning of 2024, especially claims managed by Caremark.
According to a 2022 study by Three Axis Advisors of the Oregon pharmacy market, local stores are reimbursed at rates below independent pharmacies’ acquisition and labor costs for about 75% of claims. The PBM/GoodRx partnership could push that number higher or exacerbate the losses on those 75% of claims, critics said.
The Tennessee pharmacist warned that large pharmacy chains, like CVS, which is owned by Caremark, don’t suffer from the same financial challenges as independents. “Remember, the chain stores have affiliations with the various PBMs and have a different access to profitability through these affiliations,” he noted. “Not to mention purchasing power. This is a system designed to reduce and or ultimately eliminate competition and push patients to the PBM’s affiliates.”
PBMs’ power to steer patients to their own pharmacies is one issue the Federal Trade Commission is investigating as part of an ongoing probe into the industry.
GoodRx fees. The problems don’t end there. The PBMs using GoodRx are collecting fees that may violate multiple states’ “clawback” bans and a unique Tennessee law that prohibits PBMs from reimbursing drugstores below acquisition costs, the Tennessee pharmacist and an industry representative warned.
Under the original GoodRx model, when a patient goes outside the insurance system to buy a prescription, the pharmacist adds a PBM fee to the price paid by the customer and sends the fee payment back to the benefit manager whose rate was used. The PBM then shares a portion of the fee with GoodRx. According to its latest financial filing, this fee-sharing made up 73% of GoodRx’s nearly $554 million in revenue during the first nine months of 2023.
Because these sales occur outside the insurance system, the fees aren’t regulated by rules that 21 states have enacted to prevent benefit managers from charging patients more than the total cost of the drug and then keeping the difference as profit, known as a clawback. But now that GoodRx is embedded in the PBMs’ drug benefit plans, pharmacy experts believe the fees are defying those state laws.
Receipts that different pharmacists shared with The Capitol Forum show that claims diverted to GoodRx result in at least a $5.50 fee per prescription.
A pharmacy industry representative told The Capitol Forum on the condition of anonymity that there are discussions with state lawmakers to introduce legislation that would make sure the clawback bans extend to PBMs diverting claims to GoodRx and similar discounting companies.
Meanwhile, in Tennessee, Governor Bill Lee signed a measure in 2022 that requires PBMs to reimburse pharmacies at least the cost of the drug, plus a roughly $12 dispensing fee for low-volume drugstores, defined as those that fill less than 65,000 prescriptions annually.
The Tennessee pharmacist who spoke to The Capitol Forum said that GoodRx, especially when accounting for the PBM fees, doesn’t always reimburse at this level. It’s not required to do so, he explained, because such discount card programs aren’t considered insurance and thus don’t fall under the 2022 law. But now that PBMs are using GoodRx within their drug benefit plans, he believes the law should apply.
“This further cannibalizes the profitability of the pharmacy and jeopardizes the sustainability of the independent pharmacy,” he warned.
