Showing how one relationship can reverberate across a marketplace and a sector, GoodRx — and possibly competitors — got smacked in Q1 by a dispute by an unnamed grocery chain representing a meaningful chunk of the grocery prescription business.
Noting that first quarter 2022 performance of prescription related offerings “was largely in line with the expectations we provided in February,” GoodRx co-CEO Trevor Bezdek said, “Recently, we recognized a grocery chain had taken actions that impacted acceptance of discounts from most PBMs [pharmacy benefit managers] for a subset of drugs. This impacted the acceptance of many PBM discounts for certain drugs at this grocer’s stores, which affected many parties, including GoodRx.”
The situation is also touched on in a shareholder letter and supplemental materials.
GoodRx stock fell as much as 30% in extended trading after telling investors about the grocery hit. The latest declines only worsen an existing slump that had already seen shares of the California-based prescription pricing platform falling close to 70% year to date.
While at least a couple of analysts on the earnings call Q&A attempted to get Bezdek and co-CEO Doug Hirsch to identify the grocery chain in question — at one point asking pointedly if that chain is Kroger, but getting no confirmation — Bezdek said, “We are still doing significant discount volume with this grocer, but it is currently substantially decreased from typical levels.”
Bezdek added, “This is a unique situation because while in the past a pharmacy has negotiated and changed pricing with one or two PBMs at a time, in this case, this grocer negotiated with almost all PBMs at the same time. This effectively meant that all discount pricing became unavailable to consumers.”
See also: GoodRX Pays $150M for Health Platform vitaCare
However, he said, “We expect this issue to have material impact on our Q2 and full year prescription transactions revenue. While this grocer represents less than 5% of the pharmacies on GoodRX’s network, it made up almost a quarter of our prescription transaction revenue in the first quarter,” saying the share is due to “particularly attractive PBM negotiated pricing.”
New user counts remained very consistent, and pharmacies other than this one grocer saw strong aggregate new user growth momentum. Many of this grocer’s competitors found new user growth rates up over 20% to 30%, offsetting the new user decrease at this grocer.
The Subscription Prescription
Reporting prescription transactions revenue up 16% year over year, an average of 6.4 million monthly active consumers, and subscription revenue rising 59% year over year to more 1.2 million subscription plans, Bezdek said GoodRx Gold’s subscription pricing is increasing.
Saying that GoodRx is “strategically repositioning Gold … as we tighten our focus on the people we believe we can help the most, members with chronic conditions,” Bezdek added, “To support the repositioning of Gold and to more clearly differentiate it from our prescription transactions offering, we increased prices for new Gold subscribers in January. In March, we also began increasing prices to a subset of existing subscribers.”
He said with “new subscriber acquisition and existing subscriber retention are both performing at or better than our expectations,” GoodRx will apply the price increase to all Gold memberships by the end of Q2.
Chief Financial Officer Karsten Voermann noted that prescription transactions revenue “grew 16% year over year to $155.5 million driven by a 12% year over year increase in our monthly active consumers, which exceeded 6.4 million. This includes the $1 million to $2 million impact related to the grocer issue.”
Revenue for Q1 2022 was up 27% year over year to $203.3 million, Voermann said.
“We ended the quarter with over 1.2 million subscription plans and 1.6 million members benefiting from our subscription offerings since our family subscriptions generally serve multiple consumers,” he continued. “We do not believe the grocery issue impacted our subscription revenue in the first quarter, though it may be impacted in the future.”
Acquisitions and Uncertainty
Voermann also said the April acquisition of the vitaCare platform “is expected to contribute more than $8 million of revenue in 2022,” adding that GoodRx is “confident in our ability to return to revenue growth rates in the mid 20% range in the next few years, albeit potentially off a smaller base than we expected due to the current grocer PBM dispute we’ve discussed.”
Analysts kept hammering at the mystery grocer issue as suggesting weak spots in GoodRx’s armor. Bezdek replied to one question saying, “One of the best ways that we can protect ourselves from future disruptions between PBMs and pharmacies is to continue to strengthen our relationship with the millions of consumers and HDPs who come to GoodRx.”
On that front, he noted the Monday (May 9) announcement that former Uber Vice President of Grocery and New Verticals Raj Beri will join GoodRx as the company’s first chief operating officer, and former Meta and LinkedIn executive Mark Hull will become its first chief product officer.
Read more: GoodRx Bolsters Top Ranks With Hires From Uber and Meta
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