Summary List Placement
Amazon’s new pharmacy service, announced on Tuesday, is all Wall Street can talk about.
The service, Amazon Pharmacy, offers discounts on drugs and free two-day shipping for Prime members. Customers in 45 states can now shop online for their medications.
The rollout has sent healthcare stocks tumbling. Among those hit the hardest was GoodRx, a company that went public in September and offers coupons and price-comparing services to users. As of Wednesday, GoodRx had fallen by more than 27% on the news compared with Monday’s close. On Thursday morning, it recovered by a few dollars to about 20% less than Monday.
Analysts have been saying Amazon Pharmacy is a direct competitor to GoodRx that could cut down on its customer base or, worse, make its discounts unnecessary.
Amazon is offering discounts of 80% on generic drugs and 40% on brand-name drugs for Prime members that don’t pay with insurance.
But those discounts aren’t necessarily the best discounts out there. In a note Tuesday, the SVB Leerink analysts Stephanie Davis, Joy Zhang, and Joseph Civello compared the two companies’ deals and found that GoodRx’s were way cheaper than Amazon’s.
Specifically, they looked at the 10 most commonly prescribed drugs, including Lisinopril for high blood pressure and albuterol for asthma.
Amazon’s savings benefit for Prime members yielded a lower cost in five of the medications. But on average, the 10 drugs were 47% more expensive on Amazon compared with GoodRx’s standard pricing. For GoodRx Gold, a membership program, the difference was even more stark. The same 10 drugs were 144% more expensive with Prime.
How Amazon Pharmacy secured discounts for Prime members
Amazon Pharmacy’s Prime savings were negotiated through Express Scripts, the pharmacy-benefits manager (PBM) owned by the insurer Cigna. PBMs are middlemen that administer pharmacy benefits for health plans and secure discounts from drugmakers and pharmacies.
Amazon’s savings card works in 50,000 pharmacies in Express Scripts’ network.
It’s a smaller network compared with GoodRx’s. The company works with 13 PBMs to secure deals that work in 70,000 pharmacies.
SVB Leerink and RBC Capital Markets came to GoodRx’s defense on Wednesday and Thursday, saying the markets overreacted to the Amazon news when it came to GoodRx’s stock. RBC analysts said GoodRx would remain the leading player when it came to discount cards. And Amazon Pharmacy is somewhat of a validation of GoodRx’s business model, the Leerink analysts said.
GoodRx co-CEO Doug Hirsch has made several appearances on big news networks and said that GoodRx wasn’t a direct competitor with Amazon. Indeed, Amazon Pharmacy and PillPack both accept GoodRx coupons.
“Look, we’ve covered AMZN for over two decades and fully appreciate their ability to disrupt and win markets, especially those with commodity characteristics,” the RBC analysts Mark Mahaney and Sean Dodge said in a note on Thursday morning.
But retail pharmacy is a different beast, they said.
“Frankly, GoodRx has to date very effectively created a win-win-win offering for consumers, pharma retailers, and PBMs that we don’t believe will be easily upended,” Mahaney and Dodge said.