This app has saved Americans $10 billion on prescriptions so far

Back in 2010 Doug Hirsch, a techie who has worked at Facebook and Yahoo, had a frustrating experience trying to pick up a prescription. He went to a big chain pharmacy in Los Angeles and was told — to his dismay — that his prescription would cost $450. An experienced shopper, Hirsch decided to do a price comparison. So he went to another pharmacy, where he learned the same prescription would cost him $300. Then he went to a third, where the pharmacist tried to negotiate, asking if he had a copay card and offering to match the price at another pharmacy.

"For me this was eye-opening. I just figured it was a person in a white coat and they came up with the price. To learn there was a competitive market blew my mind," he said.

When he got home from his pharmacy visits, he searched the drug name and price on Google only to come up empty-handed. Unlike shopping for plane tickets or shoes, drug prices can be almost impossible to find until you're at the pharmacy trying to fill a prescription.

Hirsch's experience led him and two other tech geeks to start GoodRx, a Santa Monica, California-based company that helps consumers find and compare prescription prices close to home or work through a free and easy-to-use app and website.

To get the information, GoodRx partners with pharmacy chains such as CVS, Target, Walgreens, Kroger and Walmart; pharmacy benefits managers (PBMs) such as Express Scripts and Caremark; and pharmaceutical companies. Individuals can now get real-time prices at 70,000 locations nationwide.

The company, which ranks No. 6 on the 2019 CNBC Disruptor 50 list, says consumers can save up to 80% with its free GoodRx Pharmacy Discount Cards, as well as through coupons on its site. The company claims that it's helped Americans save $10 billion on prescriptions since launching in 2011.

As it turns out, Hirsch's experience is pretty standard. Most Americans don't know that prices can vary wildly from pharmacy to pharmacy.

"Most Americans are buying blind. They don't know how much a drug is going to cost when they get a prescription ... and they don't know that they might be able to get it for less if they just pay cash or walk into another pharmacy," said Robin Feldman, a law professor with a focus on intellectual property and antitrust at UC Hastings College of Law and author of "Drugs, Money, and Secret Handshakes."

This is becoming an increasingly critical issue as drug prices in the U.S. spiral out of control. Even after rebates, Medicare spending for brand-name drugs rose 62% between 2011 and 2015, says Feldman. The prices of the 20 most commonly prescribed brand-name drugs for seniors have risen nearly 10 times more than the annual rate of inflation over the past five years, according to a congressional report released earlier this month.

Prices are continuing to rise. According to a quarterly report from GoodRx, the average list price of drugs — that's the price set by the manufacturer — rose 2.9% in the first quarter ending March 31, 2019.

Rising drug prices have many patients and doctors very concerned. The consequences are alarming. And bad for everyone.

"Americans are struggling to pay for prescription drugs which have huge consequences for their health. Numerous studies have found people delayed treatment, split pills, or rationed medication because of the extreme costs that we experience in the United States. The high prices hit people in the pocketbook. They also affect their health," said Adam Garber of U.S. PIRG, a public interest advocacy group that recently released a report on spiraling medication costs.

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Even with insurance, Americans are struggling to pay for medications. Since Obamacare, more and more Americans have insurance, but most are underinsured. A recent report by the Kaiser Family Foundation found that 40% of Americans have a high-deductible health insurance plan that requires them to pay more than $1,000 out of pocket before insurance kicks in. Yet less than half of Americans have $1,000 in emergency savings. This means that more than half of all Americans with insurance can't pay their deductible without going into debt.

Prescription costs are affected by a web of factors. Pharmaceutical companies sell medicine to consumers via PBMs, which then deal with insurance companies and pharmacies, using tactics such as discounts and rebates to set prices. The agreements at every step along the way are confidential, hidden not only from consumers but also from lawmakers. Not only that, but various forces channel patients into more expensive drugs. As a result of these agreements, prices can vary wildly from pharmacy to pharmacy.

Against this muddled backdrop, GoodRx helps patients by shining a spotlight on drug prices and how much they can vary. The site shows the price for various medications, easily searchable by name, and makes it easy to pull up coupons from manufacturers, GoodRx and pharmacies. GoodRx also has a monthly subscription program, GoodRx Gold, which offers additional discounts.

But the site only has access to information on how much patients would pay without insurance. Pricing agreements between insurance companies and pharmacies are not available, and patients generally cannot get that information until they get to the pharmacy counter.

Companies like GoodRx are "adding some transparency, but I think ultimately we need to restructure how prescription drug prices are set — to look at the value consumers are receiving and making sure that our dollars are making us healthy at a reasonable cost," said Garber.

High drug prices are getting more attention these days with lawmakers and advocacy groups pushing for changes that can lower drug prices and increase transparency.

There are now various bills pushing for more transparency around health-care costs, including prescription drugs, at the federal level and in most states. There's discussion on both the state and federal level about creating expert review boards to examine pricing and evaluate ways to reduce prices or focus on price gouging by requiring companies to justify huge price increases.

"The thing that I think is most interesting on the transparency side is that you're seeing policies like it move at the state level in red and blue states," said Garber. "Everyone knows someone with a prescription drug problem or has had to deal with this and felt the frustration," he added.

The pharmaceutical industry, which says pricing information is a trade secret that should not be revealed, is fighting these transparency efforts through the legislatures and various lawsuits.

"Well-functioning markets don't operate in a shroud of secrecy. I like to say that markets, like gardens, grow best in the sun and they wither without information. An industry full of secret deals and secret handshakes is unlikely to be good for consumers," said Feldman.

There is plenty of room for improvement, starting with more transparency.

"We have a long way to go. Over 200 million prescriptions are left at the counter each year. These are prescriptions that are fulfilled, and then people walk away. That is a travesty that people walk away because they can't afford them," said Hirsch.

He adds: "Ultimately I'd like to see our nation provide quality, affordable health care to everyone. It seems unlikely that we'll replace our current system anytime soon, and it's worth noting that existing government-administered programs — Medicare and Medicaid — contain significant gaps.

"Canada provides single-payer health care, and yet market forces actually make many generic medications cheaper in the U.S. If all medications and health care were free, we'd be happy to move on to some other challenge, but sadly I think that remains out of reach for the moment," says Hirsch.