Doug Hirsch - Founder of GoodRx
What is GoodRx and how does it work?
GoodRx was founded on personal experience. I had worked at Yahoo and Facebook, and I’d spent about 20 years thinking about how to improve people’s lives through technology, websites, and apps. After I had sold my last company, I got a prescription from a doctor that I brought into a Walgreens, and the pharmacy wanted to charge me $450. It was a shock, but I hadn’t talked to my doctor about the price. I wasn’t even sure I even wanted to take the drug. However, because I was curious, I took the prescription to 2 other pharmacies. One quoted me $200, and the last one asked for $350; but they chased me down in the parking lot and offered to work out a deal.
I brought this experience back to a friend because I didn’t understand what was going on. I do research on everything, but there wasn’t any readily available information on the cost of healthcare. When you go to a doctor or to pick up a prescription, there’s no pricing context: it could be $2 or $200. So, we set out to see if we could find this information anywhere. The few sources that we could find either had wildly inaccurate information or broken websites. We also had a ton of people telling us that we were wasting our time (mostly people in the pharmaceutical industry) because nobody cared. However, we just kept at it and tried to see if we could get our hands on pricing information. We launched the first version of GoodRx in mid-2011. We really just set out to see if we could educate consumers and give them the information they needed to understand and control some of their healthcare costs.
If you fast forward to today, we’ve had about 8 million people per month use our product, which has resulted in consumer savings of $7 billion. Additionally, about one third of physicians in the U.S. use GoodRx in their practice to help their patients afford their prescriptions.
How did you go from the idea stage to actually founding and creating the platform of the company? Did you already have prior experience?
Yes. I was one of the first employees of Yahoo where I learned how to iterate and build products quickly to learn and understand what works best for consumers. Oftentimes, it’s not adding more things but just coming up with one or two things that really resonate with consumers. Then, I was at Facebook where I met one of my business partners, and we built Facebook Photos. Throughout these experiences, I realized that it’s really hard to come up with something that resonates with consumers. When you get to healthcare, it becomes the most confusing thing on the planet. I think only 7% of Americans actually know what a copay or deductible is, but, we put these payments in front of people and expect them to make smart financial decisions, which is next to impossible. We came up with two ideas. The first was to see whether we could get people the information they needed, and the second was to see whether we could present this information like we would for any other product. You don’t think twice when you go to Amazon: you click a button, and it shows up. It’s the same with things like DoorDash. However, with healthcare, the process of getting a prescription is so painful and opaque.
We started looking at it like another product. For example, we used the word “coupon” when it came to providing a discount for prescriptions. It had never been used before in this industry. We spent a lot of time just thinking about how we could take the complexities of healthcare and boil them down to something that would feel like any other product you’d purchase.
How did you go about finding the pricing information you needed with the presence of negotiating entities such as Pharmacy Benefit Managers (PBMs)?
We were quick studies. We first started by talking to everybody to try to understand the system. Pharmacies, like all of healthcare, have an artificial list price that they must set. You always hear stories about people who broke their arm and pay outrageous amounts for an ambulance ride or something similar. That’s all because those entities are beholden to insurance companies who want a discount off the list price. In order to run a business, the service provider would need to hike up their prices by some amount in order to both make money and honor the contract.
What we found (and this was more by coincidence) was that with the arrival of Obamacare, more and more people had insurance, but many people were underinsured. They had high deductibles, limited formularies, or some other factor that prevented them from getting the coverage they needed. Thus, they were seeing insanely high prices that no one should have to pay. We got involved with a PBM by reaching out to one of the biggest PBMs and asked if they would like to be involved in the process of building our platform. PBMs previously had a mechanism where a consumer could get a discount, but no one had ever commercialized it. People would just print out a bunch of cards and leave them around or find uninsured Americans. No one had ever broken down the pricing discount that people could get by using them. I think we were the first company to tell a consumer what they would pay when they presented a discount to a pharmacy.
Were you met with a lot of opposition when you were telling people about this idea?
I’ll be forever grateful to the people who took time out of their day to talk to us. One of the things I was surprised by was how many people were willing to talk to us because everyone has a busy schedule. We were able to learn about this extremely complicated business through the generosity of others. On the other hand, any entrepreneur needs to be able to stomach that people are going to hate their idea. For me, that’s both incredibly stressful and empowering. If everyone’s telling me something sucks, it makes me want to do it more. We met with some pharmaceutical executives, the dean of a major medical school, and a number of other people throughout the ecosystem. Everyone looked at us like we were wasting our time on generic drugs because everyone takes brand drugs. This information was actually not true, because 90% of drugs in America are generic, and it’s also where the biggest price differential occurs. They said everyone would have insurance because Obamacare was just getting underway, but this assumption also proved to not be true. We had a lot of people who were very generous with their time, but they gave us reasons for why our idea wouldn’t work. Pharmacies would just shut us down; PBMs wouldn’t work with us; etc.
I don’t want to take full credit for this work because a lot of it is luck and timing, but the one thing we tried to do throughout this process was to be open, honest, and good actors. Unfortunately, in healthcare, there are a lot of people who are not necessarily making decisions that are beneficial for both the people they serve and their businesses. We decided early on that we were going to be upstanding, quality people who weren’t going to lie. We were going to be upfront with everyone, including the consumer, and amazingly, that’s worked out.
In terms of your current responsibilities, what additional skills have you had to learn or apply that you’ve found useful?
I have a strange skill set. I’m not a developer. I don’t have any advanced degrees. I had gotten into Stanford business school, but I also got a job at Yahoo at the same time. A week after I started at Yahoo, I started hiring MBAs, so why would I go to business school to be in the position I was already in? I think the primary skill set I brought to this experience was understanding how to bring complex concepts to a consumer-facing audience and to understand what consumers really want. I’m also fortunate enough to have amazing business partners who have complementary skill sets, whether it be marketing, coding, running a business, negotiating, etc.
I think what’s fun about being an entrepreneur is that I get to do everything. Later today, I get to approve new ads that we’ll be running on TV, perform HR work, and even work on our new office space. I’m also learning what to do as the company gets bigger. You may be somewhat good at everything, but chances are there are people who are better than you at certain tasks, so sometimes you just have to know when to step back and let smart people do their job.
Do you have advice for entrepreneurs or people who want to be healthcare entrepreneurs?
I think it’s the greatest area ever in which to be an entrepreneur because it’s so big and so inefficient. You could be in retail or entertainment, or some of these other categories that have already had so much effort spent on them, but healthcare is so big and complicated. If you make a 0.5% difference in the way that consumers utilize a service or fill a prescription, it translates to billions of dollars. Not only that, but consumers can act so inefficiently. For example, my own father has a Medicare plan through which he gets discounts on drugs from Walgreens but not CVS. He chose this plan, but he also chooses to go to CVS. It just doesn’t make any sense, but that’s how American consumers act. If you can channel those inefficiencies and get consumers to improve their behavior, you can make an impact.
Another area to address is medication adherence. If a doctor tells a patient to fill a prescription or take a drug, will the patient actually do it? There’s a lot of improvement in that area to be made, especially in preventive health, which is an area I’m really excited about. There’s a lot of benefit to be had if we can get people to make healthier choices, but I don’t think anyone’s figured out how to do that yet. I think the hard part in healthcare is figuring out who’s going to pay you. Is the consumer going to pay you? The government? Are you going to get money from a company? An insurance company? Is it going to be a covered service? In our case, we actually went into our venture without any business plan. We just said that we’re going to build the best service possible for consumers, and then we got to a scale where we found a business model.
What is that business model?
We have a few different ways of making money. We have ads on our site, and we also sell our technology to PBMs because they’re terrible at consumer experiences and showing a consumer with insurance what price they’re going to pay for a drug at the pharmacy. We also have referral programs that allow certain pharmacies to pay us: we send the consumer to that pharmacy based on the the lowest drug prices, and if the pharmacy wants to pay us, we will accept that.
Have you ever thought about applying this to healthcare services like doctor visits or surgeries as opposed to just medications?
Yes, there are two questions we get asked the most. The first is: would this work in other countries? To which the answer is generally no, although there are some exceptions. The second is: can we do this with the rest of healthcare? We lucked out because (I always want to be careful about taking too much credit for this stuff) there are 3 great things about prescriptions. First, they're consumer friendly. Most patients know they take Lipitor or any other drug. Second is that consumers take the drug frequently. Every month, patients go in and get another refill or prescription. Third, consumers obtain their drugs in a retail environment. Finally, there’s not a huge quality difference among pharmacies. For example, if I told you to go to CVS over Walgreens, you’re probably not going to lose sleep over that.
The problem with services is that if I tell you to get your cavity filled in some bad part of town, knowing that it'll cost $30 less, you might not necessarily want to do that. People want to meet and know their doctor and understand that the person who is going to put a knife into them is a qualified individual. The other problem with healthcare services is that if I came into your practice and said that I was feeling dizzy, you're going to order a battery of tests and labs that could take hours to come back. I may even get admitted to the hospital, and it’s just hard for a consumer to pre-price and understand that. It doesn’t mean it’s impossible, but it's harder to translate into the consumer experience I talked about earlier.
One thing I find interesting is that I used to think of all doctors as being the same. I’ve learned over time that different doctors have more business sense than others. For example, I find that dermatologists, dentists, and other healthcare specialties which have elective options are much more business savvy and into marketing than perhaps a surgeon who affiliates with a hospital and has a floor of patients. So, those might be the categories where there is already some sort of consumer relationship and are thus most ripe for a similar style of service.
What do you wish you knew 10 years ago that you knew now?
Ten years ago, I was in the middle of my last company. Being an entrepreneur can be so painful that I was swearing I’d never do it again, just before I did it again. The problem is that once you become an entrepreneur, it's so hard to go backwards and work for others, so I think even 10 years ago, I was just hooked on being an entrepreneur. I cannot be more thrilled by seeing how far we've come. I've very much tied my personal self-esteem and worth to the success of this project, and there's so much stress and pain involved with the process that I can't tell you how proud I am to have gotten to where I've gotten. I guess 10 years ago I would've been very stressed that I’d embark on this new venture and that I'd be a failure and a loser. The one theme which comes from everything between now and 10 years ago was stress.
What do you see yourself working on next?
I think you were tapping into it before. Today we represent about 3% of US prescriptions, and as proud as I am of that, there are 4 billion prescriptions in the US every year, so there's so much more room for us to grow. It’s not like healthcare is getting any better in this country anytime soon, at least with regard to cost, so the more people we can impact, the better. We’ll continue to push hard on prescriptions. We’ve never had better relations with pharmacies and PBMs, and these relationships enable us to do some really cool things. For instance, maybe we can bring some preventable drug costs down close to zero. I mean, why aren’t Lipitor and metformin free for everybody? It’s kind of strange to charge three or four dollars.
I also think about services and how we can go beyond the pharmacy. When we started the company, we came up with this cheesy model which stated that we wanted to drive affordability and convenience. While we’ve made a lot of progress on the affordability side, the pharmacy experience still generally sucks. The pharmacies are great, but no one wants to stand in line for 45 minutes at 11 o'clock at night. If you compare the typical way you purchase something on Amazon and how it shows up the next day versus the way you fill a prescription, there's a lot of friction there that could be resolved. We think about that a lot. I also think a lot about prescription adjacent services that we could make an impact on as well.
From your perspective, what do you think doctors, nurses, and really all healthcare providers could be doing better in this realm? In other words, what advice do you have for future medical professionals in training?
I think there are a number of older physicians who don't think cost is their problem. It's not that they're dismissive of it; they're just busy. They have 30 patients to see with maybe 10 minutes per patient, and they don't necessarily have time to diagnose you and talk about how you're going to afford the drugs they’ll be prescribing. Across the board, the physicians I've met are incredible people who've spent so much time, money, and effort to become doctors. However, there's this new burden being placed on them: not only do they need to help the patient get well, but they also need to give patients strategies to afford to be well. That's hard.
I’ve talked to so many doctors who are distraught by how much time they spend with angry patients who didn't know the cost of a drug. When they showed up at a pharmacy and discovered that the drug was too expensive, they never took it. I’ve met a lot of physicians who became physicians because they didn’t necessarily want to become business people, but I think in the future it’s going to be a necessary part of the standard appointment.