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Amazon Pharmacy is not impactful to our business: GoodRx CEO

Doug Hirsch, GoodRx CEO joins Yahoo Finance’s Anjalee Khemlani and the Yahoo Finance panel to discuss Amazon Pharmacy’s entry into the pharma space and whether or not this will impact the GoodRx business.

Video Transcript

AKIKO FUJITA: Amazon announcing on Tuesday that it is, in fact, moving forward with deliveries of generic as well as brand name drugs. In that, we saw a big hit to GoodRx on the back of that. Let's bring in Doug Hirsch. He is the CEO of GoodRx.

We've got Anjalee Khemlani joining in on the conversation as well. Doug, it's interesting. We're talking to you last Monday. The announcement from Amazon came on Tuesday, and we saw the significant stock move for GoodRx. How significant is this for your business, seeing a giant like Amazon entering the market as much as they signaled over the last several years?

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DOUG HIRSCH: I know it sounds counterintuitive, but it actually is not particularly impactful to our business. And that's because pharmacy is really confusing. And I think Amazon's announcement may have confused a lot of people in terms of what their actual intentions are.

What Amazon is trying to do is they're trying to improve their mail-order pharmacy, which is called PillPack, which they actually acquired back in 2018. And, look, I think Amazon would love to ship your medications to you. But it's really, really hard to do.

And, today, mail is only about 5% of the prescriptions that Americans take. It's not a one-click experience. And I think Amazon would like it to be. But there's only so much success-- even in COVID, actually, mail has not grown. The part that confused people was also some stuff they did in the retail pharmacy side, which I'm happy to describe if you want.

ANJALEE KHEMLANI: Oh, Doug, let's break it down, right? So we're looking at a number of aspects of this. Number one, yes, it's mail order. Number two, yes, it's a small portion of what prescriptions are filled. And we're also looking at the discount part of it. I think that's what got everyone's attention when it comes to comparing GoodRx.

But, simultaneously, what others have pointed out is that the likes of CVS, Walgreens, and Rite Aid, and other brick-and-mortar locations as well as what GoodRx offers are diversity of products and services, whether you're talking about clinics as well as the telehealth side that GoodRx is getting into. So break it down for why it's so different and what you have that separates you from Amazon pharmacy.

DOUG HIRSCH: Sure, so, again, mail is over here. Amazon's trying. I wish them luck. They're a partner of ours, actually. But it's really, really hard.

People have been trying it for literally 20 years and have not got it right. People like going to retail pharmacies. On the retail side, Amazon also partnered with Express Scripts, which has an entity called Inside Rx. We actually were the launch partner of Inside Rx.

And, if you were to go to their website, very deep, deep, deep at the bottom of the website, you'll see that you could, theoretically, use this discount card at a Walmart or a Walgreens. The reality is Amazon only did that because pharmacies-- and this is where pharmacy gets crazy-- actually can't control their own prices. They need to use a third party. Otherwise, they violate their insurance contracts.

And so Amazon basically uses-- is using Inside Rx to provide a discounted price that they can show on their website. This does not mean that Amazon expects you to take an Amazon discount card into Walmart. I don't think either of those parties would really be excited about that.

Amazon doesn't want you to leave Amazon.com. And Walmart definitely does not want their arch rival showing a better price than Walmart can offer you. So the problem is Amazon needs a third party to show this discount. It's the same in all of health care.

You can't actually just-- if you walk into my pharmacy and I say, hey, I really like you, Anjalee. I'm going to give you 50% off. I'm violating all those contracts, right? And so I know it gets complicated, and I don't want to bore your listeners too much.

But the short answer really is it's not really a plan that Amazon expects to have all these armies of people walking into their arch rivals, by the way, purchasing at a lower price than their arch rival could theoretically offer. The price is also not great.

I should point out that GoodRx Gold, our discount program, has lower prices over 90% the time than the mail-order pharmacy. So I just-- I'm honestly not worried about it. I'm actually excited about the opportunity to work not only with Amazon but all their other competitors because everyone, you know, would like to act around this news.

ZACK GUZMAN: Yeah, and that would seem to make sense, too, if you look at it as another pharmacy. Obviously, you guys work with a lot of pharmacies there to present the cost savings you're talking about. Is that what analysts are missing, though, is kind of the misappropriation of what's really going on here?

Because Deutsche Bank cut their price target in GoodRx. JPMorgan cut their price target as well. And JPMorgan, they said the hit is going to be a 7% bite out of your guys' revenue next year, growing to 30% by 2024. So, you know, what is being overlooked there in terms of the complimentary aspect of Amazon entering the space?

DOUG HIRSCH: Yeah, I mean, first of all, this happened back in 2018 when they did PillPack. Everyone thought pharmacy was over. It obviously wasn't. Back in 2000, drugstore.com, pharmacy was over. It's not.

But I think what people saw is they saw the headline of Amazon and then they saw a bunch of retailers. And they thought, oh, my god. Amazon has partnered with Walmart, and Amazon has partnered with CVS and partnered with Walgreens. They did nothing.

They literally used a third-party contract, which almost anybody can get, right? And then they buried it in the bottom the website because they don't really expect or want you to use it. But they need to do it so that they can show a price on-- when you go to Amazon.com and search for a drug.

Now, look, I'm not Amazon. I don't work there. We are close with them, though. I-- they're a great partner in GoodRx's marketplace.

I want to emphasize we have $2 billion price points a day in GoodRx. We have the Inside Rx prices. We have Amazon prices. We have all these prices.

So you're never going to find a lower price point than GoodRx. But I really don't expect armies of Amazon users start marching to Walmart and CVS. And I don't think either of those parties actually think that's the thing either.

ANJALEE KHEMLANI: Doug, to that point, I think, whenever one looks at the potential, the idea is that, because of their great logistics, which is what their real power is, that is where some of the real competition comes in because mail order hasn't been as popular in large part because of it's pretty arduous. I know that there were some individuals who tried to sign up, saying that it was really easy to do so.

So, outside of being able to just simply contract with these distributors and wholesalers, what is it that would be necessary, you know, in terms of really building up to really compete? I know some people were bringing up the idea of storage in the warehouses and especially because some drugs do, like we're seeing with the vaccines, require different storage.

That seems to be playing a role in how some people are processing this. What are your thoughts on that?

DOUG HIRSCH: So just to reiterate, you know, I don't see anything changing at retail. On the mail side, you're 100% right. Amazon has an incredible shipping network, and I hope they use that to reduce the cost of prescriptions of mail. Common sense says more people should use mail.

The problem there is that all sorts of forces are ready, unfortunately, to get in their way. For example, these PBMs, these insurance companies that manage your benefits, often have an exclusive relationship so you can only get mail through that, right? And a lot of-- you've probably seen that maybe with your own plans.

You know, in addition, getting a prescription from someone is really hard. It can take up to five days. It's no one-click shopping kind of experience when it comes to health care. And so it's just-- it's a really difficult thing.

I should mention, Amazon's not even offering 90-day prescriptions, which makes up a big chunk, because they contracted with the insurance companies basically saying, you can't do that-- we do that.

So there's lots of restrictions. Again, I would like them to succeed. I would love to have drug prices be lower. I would love to show them on GoodRx.

But I want to emphasize it's a hard road. And, you know, there's plenty companies out there you can look up today that have low prices at mail. And they're still not winning market share.

People like to go to the pharmacy. They like to see the pharmacist. They like to pick up their other things. So, you know, again, I'm happy to support it, but I think it's going to be hard.

AKIKO FUJITA: We'll be watching to see how the competition shapes up. Doug Hirsch, the CEO of GoodRx, it's good to talk to you.

DOUG HIRSCH: Thank you, guys.