Free digital coupons that lower prescription drug prices for consumers are awfully popular, but investors haven't been nearly as excited about the company producing most of those coupons, GoodRx (GDRX -2.17%). Shares of this complicated digital healthcare stock have traded mostly sideways since it made its debut on the public markets in September.
In this video clip from a recently aired segment on Fool Live, Healthcare and Cannabis Bureau Chief Corinne Cardina and longtime Motley Fool contributor Cory Renauer discuss the GoodRx IPO. Tune in to the video clip to find out why everyday investors want to think twice before taking a chance on this digital health stock.
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Corrine Cardina: Absolutely. It can be hard to find a super sharp competitive moat in this business. Turning to IPOs, we are following the trends of this year, and we're going to talk about some telehealth IPOs. The first one is GoodRx. This IPOed at the end of September. It's stock is actually pretty flat since then, part of that reason being that Wall Street analysts have issued ratings on it that show they are not exactly excited about this stock. This is not a typical telehealth stock. It's a little bit under the radar. They don't have a platform for telehealth visits with a doctor. GoodRx is actually known for the little discount cards that you take to your pharmacy. You can get your prescriptions for cheaper. But it did recently launch a telehealth platform that compares telehealth services. It's much more focused on the cost comparison side of things. This platform, it reminds me a little bit of the private companies, Zocdoc, where you can compare providers in your network. It may be aiming to take a little bit of market share away from there. Cory, what do you think of GoodRx and its business?
Cory Renauer: Well, 90% of GoodRx's revenue still comes from those coupons you mentioned earlier, which essentially connect you to a pharmacy benefits manager. How many of our listeners, do you think, understand what a pharmacy benefits manager is?
Corrine Cardina: I would say a small percent. We can definitely briefly touch on those, and I'll drop some of the tickers of those into the chat, too.
Cory Renauer: OK. A pharmacy benefit manager, essentially, is a company that healthcare plans sponsors hire to negotiate on their behalf. Healthcare plan sponsors may only represent 1,000 employees, whereas if they joined a PBM, a pharmacy benefit manager, that pharmacy benefits manager has millions of people, so when that pharmacy benefits manager negotiates with a drug manufacturer, he can negotiate a lower price. That's why if you don't have insurance, and nobody is negotiating on your behalf, drug expenses are incredibly high. By getting one of those coupons, it immediately connects you through to one of those pharmacy benefits managers who gets a small fee and then shares some of that with GoodRx. If It takes that long to explain how you make money, I really don't think anybody should be investing in this stock unless you are completely, fully aware of how all this works in the first place.
Corrine Cardina: Absolutely. They're middlemen, but the people tend to like these cards. The cards are free, so it doesn't take anything for their patients to get these discounts. I guess, not really sure what the big opportunity is here. We'll have to keep an eye on it.