Brad White has taken esomeprazole, the generic version of Nexium, to treat his acid reflux, for years. A retired school administrator living in Southlake, Texas, White has insurance, and so when he drove through his local CVS to pick up the prescription earlier this year, he was shocked when the clerk told him he owed $490 for a three-month supply.

He wasn’t quite sure what he had paid before—he’d been receiving the prescription by mail and had set up automated payments—and he knew the pills would cost him more until he met his $3,000 deductible. But paying nearly $500 for a few months of a generic drug just struck him as outrageous. He drove off without his prescription, to “regroup.”

White went home and started googling terms like “cheaper drug prices.” He soon came across GoodRx, the drug discount company, and a coupon that entitled him to get a one-month supply of the medication, without his insurance, for $17 at a nearby Kroger. “I thought, ‘This is not going to work,’” he recalls. “It absolutely worked.”

He recently used the app for another prescription, which with his insurance would have cost him $36 for a month’s supply. Using GoodRx, he could buy it for $16.60, and so he did. White knows that spending the money out-of-pocket means he’s not contributing toward his deductible and that in the long run he’s losing out on the full benefit of his insurance. But he’s okay with that tradeoff. “When it's such a huge gap, the math tells you don't use your insurance for this. I think it's pretty bizarre, honestly.” In chatting up his CVS pharmacist, White was surprised to learn that not only does the chain accept GoodRx coupons, but the pharmacist himself uses them to get his own asthma medications for a more affordable price.

When I spoke to White earlier this year, he was in a happy state of disbelief over his GoodRx discounts—if mystified by how the whole thing works. “My question becomes, How long is this going to last?” says White. “Because somebody is making money and somebody is losing money, and I can't figure out who’s who.”

You can understand the confusion. White is just one of the roughly 5.6 million Americans who use a GoodRx discount to purchase their prescription medications every month. The company’s free app, which shows what prescription drugs cost at various retailers and provides coupons for those rates, is one of the most downloaded medical apps in the iTunes and GooglePlay stores; its website has more than 18 million monthly visitors. The company’s service is beloved by consumers, widely promoted by physicians, and even touted by outlets like ProPublica, the New York Times, and yes, Fortune, which in 2019 put GoodRx on our Change the World list.The company enjoys a “net promoter score,” or loyalty rating, that is practically off the charts at 90. (By comparison, Apple’s last known NPS is 47, Walgreens's is 25, and Facebook’s, –21.)

The reason for the enthusiasm is clear: The company claims to have saved Americans more than $25 billion on prescription drugs since 2011—and, since 2019, at a rate of more than $20 million every day. That’s heroic in a country where about 58 million people go without the medications they need because of cost—and an estimated 10,000 die every month for lack of them.

Of course, GoodRx is a business, and it turns out saving Americans bundles of money on their medications is a darned good business. The company took in $550.7 million in revenue last year. That’s 42% more than in 2019—recorded, even more strikingly, in a year when a global pandemic depressed use of health care services and, as a result, the number of prescriptions written. (According to IQVIA, the health data firm, prescriptions declined 3% in 2020.) The company has proved profitable too; net income in the first half of 2020 increased 75%, to $55 million, from the previous year. (GoodRx recorded a $294 million loss for the whole year, because of the costs of its IPO.)

The Street believes in GoodRx’s counterintuitive business model too. The company’s IPO in September was one of the 20 largest last year, with a deal size of $1.14 billion, and the business currently enjoys a market value of $15.8 billion.

The company—and some analysts, too—like to say, with GoodRx, everyone wins: Consumers can afford their medications, saving money and bettering their health; providers and insurers gain patients who are more likely and able to take their meds as prescribed; and manufacturers, drugstores, and the pharmacy benefit managers (which manage drug claims for insurers), gain revenue on prescriptions that, at a higher price, may have been abandoned at the checkout. (Pharmacies pick up nondrug sales that come with foot traffic too.) But the biggest winner of all, of course, is GoodRx, which in just over a decade has managed to carve out this benign-seeming role and insinuate itself—as yet another middleman—into this deeply entrenched, thickly padded corner of American health care.

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GoodRx would not exist without the byzantine structure that currently dictates how much Americans pay for their prescription medications. “They found a good way to build a business in a fairly dysfunctional drug pricing ecosystem,” says Caleb Alexander, a professor of epidemiology and medicine at Johns Hopkins.

Adam Fein, an expert in pharmaceutical economics and drug distribution and the CEO of the Drug Channels Institute, put it more bluntly in a tweet reacting to GoodRx’s striking 2020 results: “Wow. #Pharmacy benefits are broken.”

GoodRx co-CEO and cofounder Doug Hirsch doesn’t entirely disagree. “To some extent,” he told me last fall, “our success is a barometer of how broken the health care system is.”

That market dysfunction is key to GoodRx’s origin story, which dates back to 2010 when Hirsch experienced his own round of sticker shock at a local pharmacy after learning that he owed $500 for a prescription. Hirsch had insurance and expected the cost to be a tiny fraction of that. So he went to a pharmacy across the street, where he was surprised to learn that there, the price was $300. At yet another area pharmacy, the cost was $400. At that point Hirsch too walked away, only to be chased down by the pharmacist, who was willing to negotiate.

“It kind of broke my brain,” Hirsch has said of the experience. An early employee at Yahoo and Facebook, where he was one of the conceivers of photo tagging, Hirsch had a front-row view as the digital revolution brought transparency and ease to industries from air travel to homebuying. He regarded the opaque and bewildering marketplace of prescription drugs—with its many middlemen and prices—as a worthy and overdue target for disruption, and so he and his co-founder Trevor Bezdek began the decade-long project that is GoodRx.

By Hirsch’s telling, it began as a curiosity-driven journey simply to make sense of drug prices. “To be honest, I didn’t know what a PBM [pharmacy benefit manager] was when we started this process,” says Hirsch. He and cofounders began collecting information: Costco published its drug prices on its website, and Walmart sold a handful of prescription meds for $4. Some states had laws on the books—requiring prices be disclosed online, or at the pharmacy—aimed at providing transparency, but those tools didn’t work well. “It was just a total mess,” he told me last fall.

Hirsch and his team started calling up pharmacists and reaching out across the health care landscape for help. In those early days of the Affordable Care Act, there were plenty of people who didn’t think the effort would be worth the time. They thought the system was either fixed or impossible to disrupt. But enough of them did, including an employee at the PBM MedImpact, which eventually became one of GoodRx’s first partners. “Doors always opened for us,” Hirsch says.

In time, the team had cobbled together enough price information for its data scientists to unravel the complex contracts—between PBMs and pharmacies—that set those rates. They found (as have plenty of researchers) that prices varied widely, particularly on low-cost, frequently prescribed generic drugs. Understanding the inner workings of the prescription med marketplace was a big, hairy data engineering problem, and GoodRx had cracked it.

By 2011, the company had a website and a product: a simple digital tool that in clearly displaying the cost of prescription meds at various outlets, could guide consumers to the most affordable purchase. Over time, the company’s data set has gotten more sophisticated and complete. GoodRx now gets information from virtually every PBM, among other sources, and aggregates over 200 billion price points per day in its system, says Hirsch.

Simply making price comparison and price shopping possible was something of a breakthrough in the industry, says George Hill, managing director of health care technology and services equity research at Deutsche Bank, who notes that Americans, on average, fill 11 prescriptions a year. “[GoodRx] is really the first broadly accepted and broadly used price transparency tool that exists in health care.”

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So how exactly does GoodRx work—and perhaps more importantly, how does it make money? To grasp the intricacies of the company's business model, you must understand the economic ecosystem in which pharmacies operate. Unfortunately, like so many aspects of American health care, it's a landscape that defies easy or rational explanation. It consists of many players, mostly middlemen, all vying for a piece of a $509 billion pie, which gets sliced and diced according to obscuring jargon and business practices like rebates, clawbacks, and co-pays. For the uninitiated, trying to track where the money spent on prescription drugs goes is like an especially mind-numbing and complicated follow-the-ball trick.

Chief among these players, and key to GoodRx’s story and success, are pharmacy benefit managers, or PBMs, a class of companies that originated in the 1960s to process prescription drug claims for insurers. They still do that, but over time these entities have assumed an ever-more-powerful and lucrative intermediary role in America’s prescription drug marketplace. As the go-between for insurers, manufacturers, and pharmacies, PBMs negotiate how much insurers will pay drug manufacturers, what consumers owe at the pharmacy, and how much pharmacies will be reimbursed. They also develop the formularies that determine which medications your insurance will cover; deploy “utilization management” tools, like prior authorizations, to ensure your prescription is medically necessary; and operate mail-order pharmacies, among other things. The aim of all these activities and the PBM’s stated reason for being these days is, ostensibly, to keep drug spending in check for health plans.

How well they’ve done that is a matter of intense debate. In recent years, the $402 billion industry has just as often been accused of doing the opposite through its opaque, middleman business practices. PBMs, the three largest of which have all been absorbed by major insurers in the past decade (Cigna’s Express Scripts, CVS’s Caremark, and UnitedHealth’s Optum), have cultivated a number of revenue streams over the years. But for this story, suffice it to say, they make money when they process a claim at the pharmacy. This is where GoodRx enters the picture.

For the sake of this story, we’re focusing on the market of low-cost generic drugs, which is where GoodRx provides consumers the most savings and where it makes most of its money.

Normally, when you go to the pharmacy to pick up a prescription, what you owe depends on a few factors: (1) your health plan or insurance, (2) the pharmacy benefit manager, or PBM, that your health plan has hired to manage drug costs, and (3) the pharmacy where you have chosen to fill the prescription. What you will pay is determined by the rate negotiated between that pharmacy or chain of pharmacies and your health plan’s PBM. If you don’t have insurance, you will be charged that pharmacy’s cash price, which is often very steep.

This is why, as Hirsch discovered, the price of a medication can vary so widely, pharmacy to pharmacy, and person to person. “If you have 10 people that stand in line at a McDonald's, all 10 people pay the same price for a Happy Meal. It doesn't matter if you pay cash, or with a credit card. It doesn’t matter who you are. But in health care, and also in pharmacy, if you have 10 people that stand in line to get their blood pressure medication filled, 30 tablets, all 10 people are going to either pay a different price, or their insurance is going to pay a different price,” says Don Piela Jr., the head pharmacist and owner of Madden’s, an independent pharmacy in Elberton, Ga., who calls the system “ridiculous.” Worse, he adds, “there’s no transparency.”

Indeed. Those are the very bugs in the system around which GoodRx has astutely built its product—illuminating a whole range of prices that have been negotiated between PBMs and pharmacies and allowing consumers to access any of them through GoodRx coupons.

GoodRxis able to monetize the discounts, somewhat ironically, through its partnership with the various PBMs. When a consumer seeks out a lower-price medication at a particular pharmacy with a GoodRx coupon, the PBM with that contracted price processes the claim and rewards GoodRx with a sort of “referral fee,” explains Hirsch. (These fees account for 90% of GoodRx’s revenues.) It can be a sweet deal for PBMs in that they’re able to elbow their way in and pick up revenue on transactions that they previously had no part in.

“[GoodRx] is kind of a front for PBMs,” explains Geoffrey Joyce, a health economist and director of health policy at the University of Southern California’s Schaeffer Center. “They provide the benefits a PBM might provide for uninsured consumers.” Those benefits can be substantial. “Uninsured consumers, they’re a big cash cow for pharmacies,” says Joyce. “They pay ridiculously high prices [for generic drugs].”

GoodRx is not the first company to pursue this strategy. Drug discount cards, offering consumers a more affordable PBM-network rate for their meds, have been around for decades. But GoodRx’s offering is both far more robust and sophisticated than predecessors. Rather than working with just a single PBM, GoodRx partners withmore than 12 of them, accessing all their network rates and so, a much broader range of discounts. (The company also offers a slick tech platform to search out those savings and a sizable marketing budget to promote them.) “More often than not, they’ll have a very good price,” says Lloyd Walmsley, managing director of Internet equity research at Deutsche Bank.

For people like Katie Rae Allison, a jewelry store manager and designer in Gillette, Wyo., that’s a real service. She was diagnosed with thyroid disease as a child and takes medication daily to manage her condition; without it, her health suffers. She doesn’t have insurance through her job and so was relieved—but also skeptical—when she discovered GoodRx’s app earlier this year. “It seemed too good to be true,” she told me. But she tried it and got a 90-day supply of medication for $25; without the coupon, she would have been charged $32 for a month’s worth. “That’s three months’ worth for less than what I would have paid for a month,” she says. “In a year’s time, that saves me a lot of money.”

Uninsured individuals like Allison make up just a fraction of consumers using GoodRx discounts to save on prescriptions, though. According to the company, 75% of their users have some form of insurance (that includes through a government program like Medicare).

When these customers use a GoodRx coupon to get a prescription at a more affordable rate, they’re not using their insurance—and so the PBM with the lowest contracted price at the pharmacy and GoodRx captures the revenue from the transaction, rather than the PBM that works with that individual’s health plan.

Why are so many people choosing to pay out-of-pocket with GoodRx, instead of using their hard-earned health benefits? Many are in a situation like the one faced by Brad White—even with insurance, they’re paying a hefty price for prescriptions. That has a lot to do with a recent shift by many employers to high-deductible health plans, which require users to pay at least $1,400 out-of-pocket before their coverage kicks in. (Over the past decade, the average deductible for an individual has increased 111% from $917 to $1,644, according to the Kaiser Family Foundation.) The thinking behind these plans was that they would make employees more careful, cost-conscious consumers of health care. In reality, that’s hard to do, and many people get stuck with big health bills they can’t afford. Studies show that people on high-deductible plans are more likely to delay or forgo care.

GoodRx can save insured consumers from this short-term financial stress, but it comes with a tradeoff: By paying out-of-pocket, they’re not paying toward their deductible, which will delay or possibly prevent them from ever realizing the benefits of their insurance—on which they and their employers are paying considerable monthly premiums. (According to the Kaiser Family Foundation, the average insurance premium for single coverage was $7,470 in 2020; for a family, it was $21,342.) GoodRx payments also don’t count toward an individual’s out-of-pocket maximum, another reason why LeemoreDafny, a professor at Harvard Business School, worries that people with insurance who use GoodRx may, in some cases, end up spending more overall. (On its site, GoodRx offers instructions—including how to submit receipts and fill out insurance forms—for people who want to attempt to have their out-of-pocket GoodRx payments count toward their deductible, but the company doesn’t many any promises. Says a spokesperson, “You most likely won’t be reimbursed, but you can always try.”)

But insured consumers aren’t always just looking for a better deal. Some, like Yayra Perkins, a middle school math teacher in Worcester, Mass., turn to GoodRx when insurance bureaucracy impedes care.

Perkins, a 33-year-old mother of two, enjoyed a full and active life until late 2019, when she began to experience the odd and debilitating symptoms of systemic scleroderma, the rare autoimmune condition she was diagnosed with in early 2020. While not life-threatening, systemic scleroderma, like other autoimmune disorders, is not well understood, and it’s not curable.

Doctors do their best to treat those who suffer from it with a battery of sometimes-effective medications that were originally developed for other conditions. Perkins’s doctors prescribed her a handful of things they hoped might work to tame the disruptive and painful flare-ups she experiences multiple times per day: immunosuppressants, blood pressure and acne medications, face creams, Botox, and even generic Viagra (sildenafil).

Perkins’s insurer initially denied coverage of many of these medications, presumably because they’re not designated as treatments for her condition, leaving her to pick up the tab of her treatment while she and her physician pursued the weeks- or months-long appeals process. The cost for a 90-day supply of sildenafil, which helps alleviate debilitating circulation issues she suffers in her hands, was $1,363.89; with the GoodRx coupon her doctor pointed her to, she paid $19.37.

Perkins is not alone. A survey by NPR, the Robert Wood Johnson Foundation, and the Harvard School of Public Health last year found that more than a third of American adults, and nearly half of low-income adults, had been told their health plan would not cover a drug prescribed to them, or a family member, by a doctor.

Though grateful that GoodRx’s discount made that medication affordable for her, she doesn’t feel good about it. It feels like a racket. “The whole system—it’s not right,” she told me in February. “The fact that these companies—I don't know how they're making their profit, but I'm pretty sure that when you dig underneath their process…somehow not only they are benefiting, but the private insurance industry is benefiting as well.”

In her case, and many others, she’s not wrong. Perkins’s health plan (and the PBM it hired to manage pharmacy benefits) are collecting her premium payments; meanwhile she’s spending her own money on a prescription to the benefit of GoodRx and another PBM.

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So how should one think about GoodRx and the role it plays in American health care? Well, it’s complicated.

Caleb Alexander of Johns Hopkins has studied drug price “offsets,” including the ones provided by discount coupons like those from GoodRx. He found the savings were concentrated on a relatively small number of generic drugs, and that the offsets, while relatively small—about $16 per transaction—save the average customer about 40% of the out-of-pocket cost. While he worries a bit that price-shopping for medications could create a piecemeal environment that makes it hard, especially for patients with chronic illness, to have consistent access to medication, he sees the benefit. “These types of discounts can ultimately make a big difference for consumers,” he says.

That’s why Mark Fendrick, an internist and director of the Center for Value-Based Insurance Design at the University of Michigan, keeps a stack of GoodRx coupons next to his office computer for patients who can’t afford their essential medications. He’s not wild about the system it serves; he calls GoodRx a “classic example of how chaotic the whole pricing, reimbursement, and dispensing system is.” But until the system is fixed, he’s in favor of patients using GoodRx or other forms of assistance (better than bake sales or Kickstarter campaigns, he says)to get clinically necessary medications. He recently used the app himself to fill a prescription of sildenafil—generic Viagra—for his ailing dog, Bella. GoodRx saved him from spending $720 on 60 tablets of the drug. Instead, Fendrick paid $33—a 95% discount—and notes he could have gotten the medication for even less at a pharmacy across town.

USC’s Joyce agrees GoodRx is providing an important, potentially even lifesaving service for people who can’t afford medications, but he says the benefits are harder to parse for the insured, and that the company’s effect on overall spending is hard to know. “They're not saints,” says Joyce. “They're doing this to make money, and they are very profitable given what they do.”

Though GoodRx has made drug price data more available, Joyce dismisses the idea that the company has made the system more transparent. “They’re not bringing transparency. They’re still charging a price that’s above the acquisition cost,” he says. “It’s not as if they’re driving the price down to the marginal cost.”

He and many others also don’t believe GoodRx has saved people as much as it claims. Joey Mattingly, an associate professor with the University of Maryland School of Pharmacy, suspects GoodRx uses the same fantastical math that PBMs do in making savings claims—assuming that everyone who doesn’t use a GoodRx coupon would pay the highest possible cash price rate. (The company's own explanation of how it arrives at its savings figures suggests he's likely correct.) Still, Mattingly thinks GoodRx can make a meaningful difference, especially for uninsured customers.

For GoodRx’s part, Hirsch thinks its $25 billion savings calculation is an understatement. “I think our actual impact is much bigger in terms of improvements to adherence, ER visits, etc. With GoodRx, consumers pay the entire cost of their prescription, so there is a decreased burden on insurance companies, payers, and government.” According to the company’s analysis, GoodRx has helped more than 22 million Americans afford their drugs.

Joyce doesn’t blame GoodRx for getting in the game, though. “It highlights the waste and inefficiency in the pharmaceutical supply chain and the lack of transparency of prices,” he says. “The PBMs, they’re the real culprits in this.”

In 2018, The Journal of the American Medical Association published research from Joyce and colleagues that found that in 22% of cases, consumers’ co-payments for prescription medications exceeded the drug’s costs. In other words, patients aren’t “co-paying” for these drugs, they’re overpaying, and PBMs and insurers—which are increasingly one and the same—are profiting from it. Adding further insult, pharmacists until recently were contractually prohibited from alerting insured consumers in situations where they were paying more than the cash price (i.e., what an uninsured person would pay).

From the perspective of some independent pharmacists, including Madden’s Piela, GoodRx coupons are just another way PBMs profit off the back of pharmacies like his own. He says Madden’s cash price (which does not appear on the GoodRx app) usually beats GoodRx pricing, but when a customer does use a coupon, the PBM takes a “hefty fee” and reimburses his pharmacy a smaller amount than it would otherwise, sometimes less than the drug’s cost. Even when it's a losing proposition, he’s contractually bound to honor GoodRx coupons because he has agreements with the PBMs that process the claims.

Madden’s, like other independent pharmacies, has little clout when it comes to negotiating with powerful PBMs—and walking away from them is not an option. He acknowledges that discounts, including those provided by GoodRx, can help his customers afford drugs they need. But he takes offense to the portion of the pharmacy pie GoodRx is getting for providing consumers a better—but not always the best—price. (Hirsch says GoodRx is “focused on getting the consumer the best price, period.”)

“They’re not doing anything. They're not dispensing a product, they're not calling a patient and giving them counseling, they're not telling them how to use their medication,” Piela says. "I mean, if you're getting hundreds of millions of dollars for just being an algorithm? What does that mean?”

Hirsch sees GoodRx as more than an algorithm—the company has been expanding into other businesses including telehealth and “manufacturer solutions,” a high-growth, high-margin business that connects makers of branded pharmaceuticals with consumers searching for the drugs on the GoodRx platform. The company offers GoodRx Gold and Kroger Rx Savings Club, subscription services that promise members even better deals on drugs than they’d get with the app. It alsopublishes research on drug prices, and some of clearest, most-consumer friendly explainers on the dysfunctional pharmaceutical ecosystem.

While the company’s stock briefly plummeted in November after Amazon announced it was starting its own pharmacy discount program, GoodRx’s executives argue that when it comes to their business, the Everything Store is nothing to worry about. (Among other reasons: You can use a GoodRx coupon at the Amazon pharmacy.) Analysts like Walmsley and Credit Suisse’s Jailendra Singh also think that the current threat to the company’s business is overblown.

Instead, Hirsch says he considers his bigger obstacle to be the uninformed public, who, oblivious to price variation and the better deals they could be getting, continue to purchase their prescriptions like they always have. “Our biggest competitors are Americans who don’t know any better,” Hirsch told me. He aspires for the brand to become the American consumer’s most trusted partner.

It’s true that many who use GoodRx for the first time, like White and Allison, describe the experience in almost magical terms. “It’s too good to be true,” they think, before being completely delighted by a relatively pleasant, easy, inexpensive interaction at the pharmacy. In the exchange, they don’t have to dig out an insurance card, or think about co-pays, deductibles, PBMs, or health plans—all the things that make American health care so miserable. Of course, that stuff and all the dysfunction are still there in the background. GoodRx is just the middleman that lets you forget it.