Case in point GoodRx Care’s tech changed hands.
Welcome back to Healthy Patterns. We hope everyone had a great Thanksgiving!
Also, our industry had the largest in-person event, HLTH, in Vegas. Interestingly, right before my flight, I read about Wheel’s acquisition of GoodRx care’s technology to beef up its product bundle. The announcement happened three days after we published the latest blog about B2B applications in healthcare. We believe the transaction could deliver enormous upside potential to both companies.
EMR/EHR is the core of all B2B healthcare.
A well-designed EMR will help Wheel to capture more data regarding physicians’ clinical operations while boosting user frequency through its platform.
Although there has been an ongoing debate around the benefits and drawbacks of using EHR systems, they are now the core of all B2B healthcare. And any providers not following the regulations will be punished. Such systems are rooted in physicians' daily practices, from care coordination/collaboration (mid-office) to medical billing and RCM (back-office).
The frequency of user interaction with the EMRs/EHRs enables service vendors to build an ecosystem around their flagship products by adding additional solutions or partnering with other vendors via their marketplaces - integrating low-user frequency applications with high-user frequency applications. Such a product network effect rewards a company with stronger platform defensibility and additional monetization opportunities.
A few examples include:
PointClick Care’s marketplace for SNIFs
Epic’s App Market and Cerner’s App Gallery for large healthcare systems
Greenway’s Marketplace for Ambulatory practices
As the downstream applications further prove their value, I won’t be surprised that more specialty care-focused EHR/EMRs like Flatiron in oncology and Osmind in behavioral health will start to include ecosystem partners.
While telehealth took a huge lift during the pandemic, all the traditional EMR/EHR vendors have entered the market. However, the bottleneck those companies must face creates a race among new entrants. Especially when there was a lack of a standard in the early days, all the virtual care companies built their own EHRs in-house. That is the most cost-effective way to launch a virtual care startup because the whole EHR can be specifically designed and tailored to a company’s workflow. Yet, sharing data later on with payors and other stakeholders at the operation level can get tricky.
As Wheel demonstrated its incredible value to physicians, it was almost a no-brainer that a well-designed EMR would help the company to capture more data beyond back-office operations. Such clinical data can assist Wheel in completing the insights regarding each practitioner’s service quality. I bet payors and provider customers would want to see that as the industry is tightening the standard of services.
The assumptions of win-win.
A stronger partnership via the EMR acquisition would mutually benefit both companies. With an enhanced product value proposition backed by GoodRx’s mid-office solutions, Wheel can onboard physicians faster with improved retention and LTVs. The rapidly growing physician network represents more upsides for GoodRx’s prescription coupon business, yet most importantly, how the network solves GoodRx Care’s provider supply constraints.
What we did not expect initially was the marriage between Wheel and GoodRx Care (HeyDoctor’s) EMR, but the transaction makes total sense.
It’s common knowledge that physicians and healthcare administrators hate EHRs and EMRs. Yet, people have no choice, nor do they have time to adopt any new system requiring months of training and trial & error in the traditional healthcare setting. That explains why EPIC and Cerner’s products are “immune” to innovations. On the other hand, telehealth is built upon a brand-new technology infrastructure. While its goal is to remove redundancy, telehealth allows product designers to try something new outside the moats built by those incumbents.
As an isolated sector where little information is available to outsiders, designing an EMR for busy workers requires product managers to understand the workflow inside out and optimize the product consistently through a large volume of patient visits. That’s where HeyDoctor’s EMR fits in; the product was designed by a group of healthcare professionals who played critical roles in defining DTC virtual care in the early days. And after the GoodRx acquisition, the product was consistently optimized through a high utilization rate.
Acquiring GoodRx Care’s tech stack is the best option for Wheel than developing its own in-house.
“GoodRx is well known in the industry for developing best-in-class virtual care tools… “ - Michelle Davey, Wheel CEO/co-founder.
How does this benefit GoodRx? A few hints can be found in one of Wheel’s case studies. (Claim: Although the customer in this study was anonymous, I couldn’t think of any company other than GoodRx after reviewing the partnership timeline and its traction.)
Our first assumption is that beyond the company’s core discounted prescription and telehealth products, maintaining an EMR can consume additional engineering resources.
Whether it is a public-traded or private company, we always see hyper-growth technology companies banking on one flagship product and sometimes two if both products have a strong synergy. When there is a choice, it makes sense to trim off the non-cash-generating product. Given Wheel’s economy of a scale approaching 4M in annual patient visits by EOY, plus the multi-year collaboration history between the two, the company is well-positioned to take over the technology.
Our second assumption is the partnership beyond Wheel to help GoodRx manage a clinical network or GoodRx to provide coupon API to Wheel’s customers. It could be a partnership that helps GoodRx Care to scale faster by minimizing the provider supply constraints.
While I was writing the last article, GoodRx Care still had a list of virtual care partners on their website. Soon after the acquisition was announced, the company took all the partners off the page. The question I had but wasn’t able to address before was, “why would GoodRx Care partner with a list of competitors instead of capturing the full transaction value via its own platform?”
I guess the answer would be the provider supply constraint - not enough practitioners when every virtual care company is fighting for a limited workforce. It could also be professional corporation-related issues, but at GoodRx’s scale, that seems less likely.
There was another reason I wasn’t aware of the potential transaction between Wheel and GoodRx’s EMR in the first place. I was thinking mostly about how GoodRx may become a player in the digital MSO space and expand B2B offerings on top of the coupon API, the pharmacy network, the consumer traffic, and the mid-office solutions.
Under such circumstances, GoodRx Care may become a SaaS-enabled directory for its virtual care partners while scaling back its own services. Although the company would enter the competition with other startups like Wheel, their ability to drive physicians' toplines is unparalleled compared to other companies focusing only on optimizing bottom lines.
The speculation here would be which product and related business model will make their acquisition costs more efficient, as it accounts for 45%+ of its revenue.
Now, the transaction has answered my previous questions, and GoodRx will continue to scale its telehealth practice and might have already stopped directing traffic to the competitors. Meanwhile, Wheel can obtain more clinical and care-quality data and boost user frequency by adding GoodRx’s mid-office solutions. The new speculation through these observations will be
If GoodRx struck a deal with Wheel to fully take over their service supply expansion. As mentioned in Wheel’s case study, that has been one of the biggest challenges the company has encountered. GoodRx Care's business witnessed a huge jump over the pandemic, just the same as other medication management companies. To meet the high demands, there will be a big supply gap to fill, and it seems that Wheel is the only company in the market growing into the scale to meet GoodRx’s requirements.
If the above holds, it explains why GoodRx Care is minimizing outsourcing services. (Now, the only way to find those virtual care partners will be through one of the company’s old press.) Even if those partnerships are ongoing behind the scenes, I doubt it will be much of a growing business.
Lastly, Amazon, the 800-pound gorilla, is now moving into DTC medication management with Amazon Clinic. The industry immediately sees it as a threat from the company’s prime subscriber base of 200M worldwide (~80M in the U.S.). Also, Pillpack and Amazon’s ground logistics grant the tech incumbent an unfair advantage over the startups - lower CACs and better unit economics.
However, the problem Amazon faces will be the same as GoodRx’s - will they be able to scoop up enough prescribers to serve the demand? One can debate their deep pockets, yet how much money they will be willing to sink is still a question, e.g., Haven.
It will be a foresightful defensible play if there is a tighter partnership between GoodRx and Wheel via this acquisition. At the end of the day, whoever owns the service supplies wins the market. Digital MSO companies like Wheel now have gained leverage on the table.
In conclusion, GoodRx’s core product is its coupon API, which relies on a steady supply of prescriptions from medical providers. So they developed GoodRx Care. However, that alone may not generate enough supply and force them to list competitive telehealth providers to make up the difference.
By selling the EMR to Wheel and removing the competitive telehealth providers from their platform, Wheel is posed to scale their operations, which, in turn, would drive traffic to GoodRx’s coupon API.
This partnership makes sense from two different viewpoints:
This partnership mutually solves their issues of scale and product focus.
Additionally, by handing off the EMR to Wheel, GoodRx Care would handle more inbound volume rather than having to share revenue with competitive telehealth providers.
Thanks for reading,