A friend recently had to get a medication filled.  Even though he has an excellent health insurance plan, the prescription was not covered.

At the local CVS and Walgreens pharmacies, the price quotes were generally in the $650 range—a lot of money. He pleaded his case to the insurance company but to no avail.

Then, he remembered that he had a “GoodRx™” card.  These cards are available at many locations, like candy in a dish at Halloween.  The one he got was from his place of employment.  GoodRx also runs TV advertising about their cards. 

At any rate, he took this card to the local Walgreens.  With the card, the cost of the prescription went down to $42!

This was a puzzling (though welcomed) development.  The company that receives his insurance premiums, a substantial amount, I might add, refused to cover the medication. On the other hand, a company that does not benefit from his insurance premiums gets him coverage. How can such a stark difference in cost exist?

The answer lies in the intricacies of our healthcare system.

I snooped around and found an excellent explanation in an article by Dr. Adam J. Fein, PhD, titled “How GoodRx Profits from Our Broken Pharmacy Pricing System.”  The summary is that:

1. Pharmacies have artificially high list prices so they will not be underpaid by a pharmacy benefits manager (PBM) when a prescription is covered by insurance. In the case of this friend, the list price was about $650.   
2. So, when a cash-paying customer comes by (such as someone with no insurance), the customer is presented with the list price.  
3. GoodRx then plays an arbitrage game of sorts.  In essence, they provide the cash paying customer access to the same PBM rates.  Because GoodRx works with several of the same PBMs as the pharmacies, the pharmacies accept the payment.

In the friend’s case, the $42 he paid got split somehow between Walgreens and GoodRx (this is one of GoodRx’s revenue streams). On the surface, it would have made more sense for Walgreens to just have charged, say, $75 and kept all the revenue—my friend would likely have paid that with no questions asked. However, Walgreens would have to offer that price to the PBMs, which is something they do not want to do. So, there is the answer.