Years ago, my friend relayed a story when he played a game of Taboo. The party game where, with verbal clues given, your team has to guess a word.   

On his team was a middle-aged woman who was, in kind terms, larger in size. It was a competitive match – neck and neck between both groups. Then the woman stepped up to give her word to the team. Her clue was simple stated:

“What I AM!”

The guesses came in:


Then she pointed down with both hands to her abdominal area. 

“C’mon guys…what I am!”

Time, which couldn’t expire fast enough for my friend and his team, eventually ran out. The word to guess was ‘heavy’.

Of course they knew what she was intimating, yet NO ONE would dare speak it.  

That story reminds me of pricing in the healthcare industry. You will be hard-pressed to find any leader for a healthcare provider, payer, pharma company, or industry-representing organization of these three, who wants to address perhaps the biggest taboo topic in healthcare – pricing and the critical for U.S. healthcare to start lowering prices.

Talk about PRICING to leaders – then wait to receive one or more of these four responses and actions:  

  • Pointing fingers and shifting blame at another industry segment as ‘the problem’
  • Attempting to re-frame terms by switching from consumer-centric ‘prices’ to company-centric ‘costs’ 
  • Shrug their shoulders and agree that it’s needed – but they can do very little on their end
  • Pharma leaders will counter lower prices as a critical deterrent to R&D, innovation, and drug development

Whether ignorance or purposeful avoidance, the prices of healthcare services, products, coverage, and prescription drugs is perhaps the biggest issue that’s impacting our runaway healthcare spending. One need only take a look at the numbers, which are illustrated by the chart that shows a pre-pandemic look at health expenditures in the U.S. from 1970 to 2019.

In 50 years, the average healthcare spending per person in the United States has increased 31-fold from $353 per person in 1970 to $11,582 in 2019. In 1970, 6.9% of the GDP ($74.1 Billion) was spent on healthcare. Today that percentage has ballooned to 17.7% or $3.8 Trillion; and the Centers for Medicare and Medicaid Services (CMS) estimates that at current pace, we will reach a mind-blowing $6.2 Trillion annual spend on healthcare by 20281.

One of the critical drivers of this rise in expenditures per person, as well in the rising percentage of GDP is not only in our increase of utilization or volume – but also in the massive rise of prices attached to healthcare products and services. All of this encompassed in a 50+ year fee-for-service system with deeply-entrenched public companies, investors, employees, special interest groups, and politicians engulfed in a multi-trillion dollars fee-for-service industry.

One of the most ignored aspects of healthcare spending is that it carries two components – utilization or volume, as well as pricing. 

In 2018, the Harvard T.H. Chan School of Public Health, Harvard Global Health Institute, and the London School of Economics released a study with findings that stunned many in the healthcare community. Lead researcher Dr. Ashish Jha and others were examining the main drivers of high healthcare costs in the U.S. when comparing our system to 10 of the highest-income countries (United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland, and Denmark). 

The report and its findings found that “the major drivers of high healthcare costs in the U.S. appear to be higher prices for nearly everything – from physician and hospital services to diagnostic tests and pharmaceuticals – and administrative complexity”.2

It also dispelled many of the popularly-held myths on the U.S. vs. peer countries on healthcare utilization and quality of care levels. 

In 2019, Jha made remarks at AMA State Advocacy Summit:

“The only equation that we’re going to talk about today in total spending is quantity times price. I think I’ve tried to make the argument that quantity isn’t the big explanatory factor for higher spending. And so that only leaves one other factor, which is price…”

Jha made an additional point, which I’ve been ringing the bell on for years. Namely that many healthcare leaders and pundits have a big focus on value-based care, largely from the perspective of decreasing utilization while improving quality. The problem is that this perspective completely avoids the connection between high prices and high healthcare costs. 

“States are starting to realize that a lot of the action is not just in quantity, but it’s in prices. And where states are going is tiptoeing in—some people say it’s more than tiptoeing, up to you—into price regulation. Because if prices are a problem, there are two ways that we know how to deal with prices: competition and regulation.”

One has to wonder why in the framework of healthcare spending (‘costs’), is there a reason why quantity/quality has pushed without a focus on set prices? Could it be that moving pricing to the center of the discussion would reveal the inner workings of price and how they come to be in healthcare?



The taboo topic of pricing in healthcare has a longstanding history since the mid 1960’s. Healthcare services, hospital care, and prescription drugs make up nearly 70% of U.S. healthcare spending1– and yet the way that their prices are set remains largely unaffected by consumer interaction and regulatory oversight.  



Many people in healthcare erroneous believe that Medicare sets the initial reimbursement compensation for physician and clinical services – but that’s not true. In fact, since 1992 the nation’s largest health insurer adopts payment values largely suggested by a specialized committee segment of the American Medical Association (AMA) called the Relative Value Unit Committee or RUC. 

Who is the RUC? Let’s learn from the AMA website:

The RUC is comprised of a volunteer group of 32 physicians and over 300 medical advisors, other healthcare professionals and national specialty society experts that represent each sector of medicine, including primary care physicians and specialists.

The AMA readily states that Medicare historically accepts between 90-95% of RUC recommendations on compensation level amounts. So in effect, where is the consumer and consumer oversight groups in this entire process?  



Hospital pricing happens through up their own Charge Description Master (CDM) or Chargemaster – a list of products, procedures, and services. There is no standardization for how any individual hospital chooses to set up any set of items on their Chargemaster list. In fact, Chargemaster items often differ by several hundred percent for the same exact service, fee, or grouping – even when the hospitals are within just a few miles of one another, or there are different hospitals owned by the same entity.

Case in point is a look at Sutter Health, a Northern California non-profit health system with 24 hospitals and over 200 clinics located in Northern California. Through an online pricing tool, Sutter has made some of their services transparent – based on gross charges, discount cash prices, commercial insurer prices and more. Let’s see the differences in pricing in a number of select situations:










The patient in the above scenario is unlucky enough to have undergone a spinal fusion surgery in their neck. Perhaps just as unfortunate in this case is that they are uninsured, and will have to pay out of pocket. The gross charges for this same surgery differ by $154,000 – that variance is larger than the lowest price shown for it.  

It’s very likely that the self-pay patient will never be clued in that a 75-minute drive to have this surgery in one specific hospital in Sutter’s 24-hospital stable would save them almost $47,000 in out of pocket costs. 







































On the left side in this example, we see Sutter’s pricing to receive an MRI of the lower spine. By now it shouldn’t surprise you that the pricing for the same exact service differs by up to 305% between hospitals, even located within the same part of the same state. Depending on your health plan and which hospital you visit to have the imaging done, your insurer is charged a price of between $948 up to $3,848. 

But look on the right side numbers. What happens when the patient doesn’t have insurance and has to pay out of pocket?

Notice how ALL but one of Sutter’s hospitals have pricing skewed to the right. Funny how in this situation, there’s nearly level pricing, right? How many uninsured patients do you think have the knowledge and insight to look up the right right hospital for their situation?

It must be made clear that this type of variation and pricing scheme is not inherent only to Sutter, or California hospitals. It is endemic to the very nature of how prices and the manner to which prices are set in hospitals and health systems. We are not seeking to blame provider organizations per se, but to recognize that prices are already too high for the majority of many American citizens to afford. 



These days drug companies seems to be getting the brunt of finger pointing – often from other healthcare players, as well as politicians. That criticism may be well founded, as recent studies point to troubling news on drug prices in the U.S.

  • From 2007 to 2018, the list price for brand-name drugs increased on average by 159% and that net prices of drugs rose by 60%6
  • The U.S. only accounts for 24% of prescription drug consumption, but pays 58% of the total cost7
  • Prescription drugs in the U.S. cost approximately 2.5 times more than the same drugs in other Western Countries8

If you think of nearly all consumer products that we purchase, the manufacturer sets a low price that they then sell to a retail store. That retail store, whether online or brick-and-mortar, then increases the price to sell to its customer. There may be middlemen such as wholesalers, distributors, and/or resellers that sit in between the manufacturer and retail store, and the price may incrementally step up. The point is that the price starts low and rises throughout the supply chain by the time the customer purchases it. 

That’s not the way drug prices work; and the supply chain for this industry is both overly complex, and contributes into price increases. You can get an excellent review of the entire process by visiting this Wall Street Journal video. Suffice to say that it’s a complicated and eyebrow-raising journey into a world of kickbacks, rebates, backdoor agreements, select drugs being made available, or not available to certain health plan members. The overarching point is that drug manufacturers actually have to set a sky-high list price, so that every hungry bird in this industry and intricate supply chain gets paid – and to be clear, some of the players don’t get paid that well either. 

The overarching point to this segment on price setting is that the majority of goods and services that healthcare consumers spend their money on, largely carry pricing that is set by private means. While there may be negotiated prices by healthcare plans, there are also higher levels of patient or consumer payments coming out of pocket than ever before. 

Prices and how prices are set must be looked at, if we are ever to have serious conversations and change on lowering prices for greater affordability.














So had did prices and pricing in healthcare become such a critical issue?

Back in 1963, a fast-rising economist named Kenneth Arrow was approached by the Ford Foundation to examine medical markets. Arrow served on President Kennedy’s Council of Economic Advisors, and had written a paper called Uncertainty and the Welfare Economics of Medicare Care

In this landmark paper, Arrow explained that the market for medical care was unique because [unlike normal consumer markets] outsiders could not judge the quantity or quality of services provided. He concluded, “behavior expected of sellers of medical care is different from that of business men in general.” Arrow argued that patients had to implicitly trust doctors, with the presumption that their altruistic instincts and actions would be placed before their personal motives. Moreover, that the delivery of health care deviates from a normal free market, and such deviation could and should only be corrected by government intervention.

These conclusions were a part of the Johnson Administration establishing Title XVIII and Title XIX of The Social Security Act – creating the entities known as Medicare and Medicaid. A major effort was underway to sign up the country’s seniors – and it worked. Of the 19 million seniors eligible for Medicare, a stunning 93 percent enrolled by the summer of 1966. 

However, from as early as the 1930’s the American Medical Association (AMA) was largely opposed to any type of health insurance. It’s staunch opposition based on grounds that “no third party must be permitted to come between the patient and his physician in any medical relation.”  That mindset remained, so at the time of Medicare’s creation, the government wanted to make sure that they had the trust and buy-in from the AMA and its then-significant membership representation (then 70% of all doctors).

For this reason, the Social Security Administration’s Bureau of Health (forerunner to HCFA) decided to pay physicians and hospitals on a profile of fees deemed “reasonable and necessary.” They also permitted physicians and hospitals to directly bill the newly created payer for services rendered. Additionally, doctors did not have to accept Medicare’s fee as payment in full (i.e., “take assignment”). As professional self-control was extended to pricing, the rate of increase in doctors’ fees doubled. Some even charged Medicare up to four times what they accepted from commercial carriers.

From 1966 to 1973, Medicare and Medicaid opened up coverage to more people and larger quantities of covered services. Medicaid made expensive nursing home facilities a covered benefit for senior citizens. Demand continued to increase and prices continued to rise – as spending rose by an average of 11.9% per year. In 1974, Nixon’s wage price controls expired and the Employee Retirement Income Security Act (ERISA) was enacted, allowing self-insured corporations an exemption from state regulations and taxes. Money was flush, and up until 1982 prices rose by an average of 14.1% per year. Home health care grew at a monstrous 32.5% per year.5

During this time, Baby Boomers were becoming adults and having families of their own. People starting living longer due to healthcare technology and advanced. This boom at both ends of the population’s age spectrum generated huge demand for healthcare. This ramped up demand and prices, and eventually healthcare grew economy of scales through the creation of hospital mergers, hospitals owning physician practices, and outpatient services. Eventually, health systems wrapped by and merged groups of hospitals and attached entities. 

While this growth turned healthcare from a profession into the nation’s largest business industry, it also increased prices and compensation from private insured payments.


Healthcare had to meet the demand by building economies of scale, which happened largely through hospital mergers in the 1990’s and 2000’s. From 2004 to 2011, hospital ownership of physician practices doubled from 24% to 49%. Hospitals eventually grew to own and control many more service components such as outpatient services, skilled nursing centers, 

Many hospitals began to consolidate through health systems, and by 2018 

In the early 1990’s, hospitals began 









Zack Cooper, a healthcare economist at Yale stated that within healthcare today, there are “pockets of amazing care & amazing innovation surrounded by a sea of dysfunction.” One of the chief contributors to this dysfunction has been the the nosebleed prices, falling upon and supported by the wallets individual and company purchasers of healthcare services, coverage, and prescription drugs. 


Marty Makary, MD, MPH a health policy expert at Johns Hopkins notes that the healthcare service market in the U.S. has been largely noncompetitive in nature. He states, “It’s an American disgrace that the price to deliver a baby in New York City ranges from $6000 to $70,000 with no difference in quality.”




Recently companies such as Amazon, Walmart, and GoodRx have been entering the healthcare marketplace. Their strategy appears to be less about directly competing against hospitals or drug companies – but rather, to broad their own customer experience and strengths in historical-proven and well-trusted consumerism.

A major carrot they are using is price. Transparent pricing within Walmart’s retail clinics, GoodRx’s drug discount online coupons, and also with telehealth services. Because they recognize what legacy healthcare players do not – that with greater shift of monies coming out of individual and company consumer wallets, price DOES matter. Avoid it at your own peril.

Recently, I 







The PRICING and PRICES in healthcare must be solved in a way like no other industry.

It is going to take providers, payers, pharma, and politicians NOT pointing fingers at each other, to contribute to creating a sustainably affordable system for current and future generations. Price setting, greater transparency with providers, payers, and pharma. 

Here’s the thing…even when great technology works to bring costs in healthcare down, it will be up to companies to decide to pass those savings to the patient/member in the form of lower pricing – in lieu of greater profitability.



GoodRx is a company who saw a tremendous opportunity made available through major coverage ‘gaps’ in today’s healthcare system. Applicable to millions of healthcare consumer clients that PBMs are not set up to serve; and where such consumers/patients spend their own dollars due to needed meds that:

  • are covered, but carry higher levels of cost-sharing (deductibles/co-payments)
  • are not covered on their current health plans
  • are fully out of pocket in cost, due to being uninsured

Co-CEO Doug Hirsch positions GoodRx as filling a public need as a ‘marketplace’, rather than a pharmacy (1). The company and its customers are given preferential access to the lowest pricing of prescription pharmaceuticals that PBMs negotiated with retail pharmacies across America.

Through its online marketplace and ranking as the #1 most downloaded healthcare application, GoodRx effectively drives greater prescription drug transactions through a B2C model. This adds volume and revenue – both for itself as well as its PBM partners.

Having “take rates” of up to 15% per online customer transaction, GoodRx and companies in the PBM extended consumer space have gross margins that are many multiples higher than wholesalers such as McKesson. This is one of the reasons that GoodRx went public last September with its $388 million in 2019 revenue, and a whopping $139 million in operating profit (2).

All this said, the biggest issue GoodRx and companies like it have right now is with gaining greater public awareness and use. I’ve been a GoodRx user for years, and I can’t count the number of times that while standing in the local Costco pharma line, I opened my mouth to other people.

Honestly, it’s empowering to watch their faces light up. The blend of understanding, appreciation, and user experience in the app – all reaching them before they hit the register. There have been times after they see the real cost savings, which can be significant, that their faces light up.

When is the last time you saw people getting giddy in the pharmaceutical line?

Sadly, many Americans assume that their Medicare and private plan payments are the only and best option they have. Though it doesn’t work for every drug, online PBM-partnered marketplaces simply have better pricing in many cases.

On the other side, retail pharmacies recognize this and typically ask for customer plan coverage as the norm in quoting price, filling prescriptions, and collecting payment. Additionally, they institute higher ‘usual-and-customary’ cash pricing for customers who are uninsured or ‘pharmaceutically’ underinsured, and don’t realize that such marketplaces exist.



Right now, GoodRx offers healthcare providers the ability to put an eye-catching card tray on their countertop. In this effort, patients can become a GoodRx member without cost, and still gain the benefit. A paid membership allows for even greater financial savings.

GoodRx also offers provider care through its extended HeyDoctor telehealth platform. This creates a channel for direct quality patient care; and to be fair, it also feeds back into more people using their service to drive more volume of prescription fills and revenue.

There is also a page that GoodRx offers to other telehealth organizations; and it appears they are paid an affiliate referral fee from such outside companies. Though not confirmed, there may also be a return referral relationship, where these telehealth providers such as @Amwell, @Teladoc, and @MDLive refer patients back into GoodRx for payment.

If there is such a referring relationship, I hope GoodRx is paying well. Because with their margins, other telehealth companies and many non-PBM healthcare companies could and should consider forming their own branded PBM ‘piggyback’ partner marketplaces. It only serves to add income, extra prescription volume, and thus continue to benefit PBM players.




We know that GoodRx has a telehealth service as well as cards in provider offices. However, there’s a lot more meaning meat on this bone – and I recently suggested as much to their leadership. Namely, to push business development to and through all types of providers around the country in a more unique, effective, and scalable manner.

Pushing through their pricing data through doctor screen interfaces within real-time, point-of-care encounters with patients would include:

  • The application sitting on top of the EHR
  • Data that can be easily searched, found, and utilized in face-to-face and virtual patient encounters with all types of doctors, retail clinics, health systems, hospitals, etc.
  • The ability of the doctor/staff to personalize a print off or digitally send to the patient, in the form of a prescription coupon to their pharmacy. This need only be shown to the pharmacy staff, which must honor the relationship and coupon pricing.

Advanced functionality and relationship benefit would entail:

  • Good Rx pricing that remains rock-bottom in price for 12 hours of timing from selection/print off – then if not filled in 12 hours by the patient, may go up an additional amount (ex: 10%).
  • Reporting to providers to let them know when initial and subsequent refills have been filled.



The Tie-In with Non-Adherence:

Medication non-adherence (MNA) is known as America’s ‘other’ drug problem. It leads to 125,000 preventable deaths each year, and about $300 billion in avoidable healthcare costs.

The numbers are staggering, as those dying from MNA are ten times higher than homicide and 30x greater for someone over the age of 50 (3).

In the United States, it is estimated that 20-30% of prescriptions are never filled. Even after they are filled, there is a 50% chance that the continued use of that medication will not be followed as prescribed, especially after the first six months (4).

A significant portion of the problem relates to affordability. Researchers at the National Bureau of Economic Research released a February 2021 report that was staggering. Noting even a relatively modest increase in drug costs ($10 per prescription) led to a 33% increase in mortality

From NBER lead researcher Amitabh Chandra:

“I never thought we would get a mortality effect of this size…We never thought people would be cutting back on life-saving drugs to this degree.”

When a company such as GoodRx can push real-time pricing information right to the screen of a doctor during their visit, it allows for these benefits:

  • Improved patient experience through greater ‘allyship’ between doctor/staff and patient, in terms of pricing and trust
  • Less reliance on multi-step action from the patient (pick up card, register)
  • Decreased re-admittance to hospital
  • Reporting to let providers know how often it was GoodRx or a similar marketplace that made the difference in filling and re-filling prescriptions
  • Better management of chronic disease
  • Negative re-enforcement of prescription adherence through a price-based ‘stick’ approach, related to time and execution


COMPETITORS…jump in. The water is fresh.

Candidly, GoodRx is just the tip of the iceberg in the space for many companies to cater to real-time, lowest price drug pricing. PBMs will recognize and soon realize the power of the stick they carry.

Think of it like this…PBMs flourish off increased prescription transactions. Most ANY COMPANY involved in the patient care journey has the capability to connect with PBMs via contract, and then build an online platform.

The retail drug sector is contractually bound to PBMs, and they must honor the GoodRx coupon pricing. So why wouldn’t PBMs want to add on more ‘consumer extenders’? Just imagine Walmart, Target, or other mega consumer companies cutting deals with PBMs.

“Steve, they would be losing money on the pharma business.”

Do you think they’re rolling in the dough on that business segment anyway? It’s a loss-leader that drives brand, feet in stores, additional revenue, and many other positives. So set up a carve-out corporate entity that helps them offset losses.

Remember that GoodRx gets up to 15% per transaction. What do you think mega stores that have the potential to leverage and carry far more people and prescription-fill transactions can negotiate with PBMs?

What about all the grocery stores, McDonald’s, Costco, and Dollar General. How about mobile companies that want to be more ‘caring’ to their customer’s health and dollars?

Get the point? Consumerism is just starting to grow throughout healthcare, and many companies want to, and now can get a significant foothold into healthcare journeys and experiences – without carrying healthcare data.



Our healthcare system is running up against a significant affordability crisis. It’s impacting health coverage, care services, and prescription drugs. People of all ages are not only mismanaging their healthcare, but rates of re-hospitalization and death are rising due to medical nonadherence.

GoodRx and other consumer-facing prescription marketplaces fill a significant void created by painful financial gaps in prescription affordability felt by many patients taking on greater levels of cost-sharing. However, there continues to be a large-scale lack of awareness and strengthening of patient education around best-price options for many outpatient medications.

A data connection between PBM-related marketplaces and providers provides real-time availability and assistance to patients at the critical point-of-care moment. Availability and growth of such arrangements serves to benefit patients, providers, self-insured employers, as well as PBMs and consumer marketplace services.

[ AUTHOR’S NOTE:  It is critically important to point out that the majority of healthcare companies, leaders, and millions of employees working within them are committed to serving out of love, caring, and bringing their best intent and efforts. In no way is this article or the author’s view meant to imply purposeful malice, deceit, or intent to financially or otherwise harm consumers and patients.]


Dr. Steve Ambrose is a healthcare strategist with 25 years in clinical, technology, patient engagement, and consumerism. He is selectively reviewing options to place his talents and passion into his next FT role.

A former clinic-owning provider who holds 4 patents in data technology as well as having been a host of the Red Hot Healthcare leadership show. He also served as VP of strategy and customer service operations for a nationwide financial data organization, where he led customer success, content creation, and digital marketing segments.

Additionally, he developed a revolutionary solution that serves as a mechanism to mass-empower the reduction of incivility across entire organizations. Walking the Ridge continues to grow, having company, city government, and higher education institution clients.   

Dr. Ambrose may be reached through contact information on his LinkedIn profile.



1. “NHE Fact Sheet | CMS.”, 2019.

2. “Prices of Labor, Prices of Pharmaceuticals, and Administrative Costs Are the Key Drivers of High U.S. Healthcare Spending.” News, March 13, 2018.

‌3. “How Has U.S. Spending on Healthcare Changed over Time? – Peterson-KFF Health System Tracker.” Peterson-KFF Health System Tracker, December 23, 2020.

4. Entis, Laura. “Why Does Medicine Cost so Much? Here’s How Drug Prices Are Set.” Time. Time, April 9, 2019.

5. “See for Yourself If Obamacare Increased Health Care Costs.” The Balance, 2020.

2. Joseph, Seth. “What Could a Healthcare Marketplace Look Like? GoodRx Is Trying to Show Us.” Forbes, January 12, 2021.

‌3. L, Jeff. “15 Frightening Stats on Medication Adherence (plus Infographic).”, 2018.,have%20with%20their%20loved%20ones..

‌4. “The Cost of Non-Adherence in Healthcare – CloudMineInc.” CloudMineInc, February 8, 2021.