A team of Internet entrepreneurs in downtown Manhattan wants to revolutionize how Americans get prescription drugs. Their company, Blink Health, has a crazy idea: let customers shop for the best deal. The founders of Blink Health seek to eliminate the middlemen and comparison-shop at their website to see if you can get a better deal than what’s being offered by and insurance plan or the drugstore.
Blink Health claims that the pharmacy business remains largely untouched because customers haven’t easily been able to shop online for a better price. They’re buying drugs the way they bought them in the predigital age – at the drugstore. The middlemen still flourish, at the expense of everyone else..
The dominant middlemen are the pharmacy benefit managers, or PBMs, which are hired by private and government health-insurance plans to administer drug benefits. Dozens of small PBMs once competed for business, but today three large firms – Express Scripts, CVS Caremark, and OptumRx – together control more than 75 percent of the market.
While other twentysomethings were launching Internet startups, Geoffrey Chaiken was wondering why there was no Uber or Airbnb in the pharmacy industry. After dropping out of Yale to start a company developing epilepsy drugs, he began studying the industry’s supply chain.
Together with his younger brother, Matthew, he started Blink Health in his downtown apartment four years ago. Today, it has 600,000 customers and an office in SoHo with 220 employees. To help them run the company, the Chaikens brought in veterans of online companies like Kayak as well as the drug industry, including Bill Doyle, who’d spent decades working for Johnson & Johnson.
Blink negotiates with drug manufacturers, using its purchasing power to extract discounts off the list price. Then, instead of collecting secret rebates or steering patients to a preferred drug, it posts all the discounted prices on its website (and makes money by charging the patient slightly more than it reimburses the pharmacy). Instead of forcing patients to turn over their prescription to a pharmacist to find out what it will cost, Blink lets doctors and patients shop on the web before making a commitment.
For example, a month’s supply for the generic version of Lipitor (atorvastatin) would typically cost more than $100 at CVS and more than $200 at Walgreens. The generic version of Crestor (rosuvastatin) would cost more than $175 at either chain. If your plan covered the Lipitor but not the Crestor generic, you might spend between $5 and $40 for the Lipitor, but you’d have to pay the full $175 for the Crestor – so you might not buy it, even though it would be the better option for you.
At Blink’s website, you can typically find the Lipitor generic priced under $9 and the Crestor under $12. If you buy it from Blink, you can get it delivered to your home or pick it up at a local drugstore. Independent pharmacies have been eager to work with Blink because it’s simpler and more profitable than dealing with insurance plans.
Blink makes straightforward payments for the drugs and doesn’t impose complicated contracts (or gag clauses). The PBMs often pay less, and they impose various fees, like charging pharmacists $5 if they call their help desk to deal with a prescription. The PBMs can decide months after a transaction that the pharmacy must give back part of the reimbursement—a retroactive penalty called a “clawback”—which can cause the pharmacy to lose money on the prescription.
Blink Health has shown that the same market forces that liberated airlines and their passengers can liberate drugmakers and patients. These forces could transform the rest of the health-care industry. The prices of most medical procedures and hospital stays are as complex and opaque as they are for prescription drugs. The prices are known, again, only to the middlemen, so it’s not surprising that costs keep rising.