Pharma

Can a startup build a business on prescription drug coupons?

Thanks to the recession, the Internet and TLC, coupons are all the rage these days. […]

Thanks to the recession, the Internet and TLC, coupons are all the rage these days. And they’ve found a place in healthcare, too.

Websites like RxVouchers and MedicationCoupons.com sort through and compile new prescription drug coupons offered by manufacturers looking to attract brand loyalty and stave off generic competition, and makes them easy for consumers to access.

“A lot of them are for drugs that haven’t gone generic — for those it’s about getting them on the product long-term,” said Raj Mehra, the co-founder of a new player in the drug discount space, My Coupon Doc. “But it’s becoming more common where those drugs with generics will have coupons to match the generic price,”

Launched last month, My Coupon Doc compiles over-the-counter and prescription drug coupons into a searchable and browsable database that consumers can use without having to log in or sign up.

Mehra, whose father was a pharmaceutical salesman and always had coupons handy, said he was inspired to start the business when he saw deep discount companies like Groupon experiencing success by saving people money on things they didn’t really need. What people do need, he decided, is affordable medications and providing easy access to drug discounts was his solution.

In terms of supply and demand, it’s a solid idea. In 2011, about half of the 100 top-selling drugs offered coupons, according to the Sector & Sovereign Research blog. Despite opposition from insurance providers, who still pay the full price of brand name drugs even when consumers get manufacturers’ discounts on co-pays, pharma companies like coupons because improved sales and adherence rates for their drugs outweigh the cost of subsidizing co-pays.

And the demand is there too, according to Tim Fagan, the chief operating officer of Whiting, Indiana-based CouponCabin, which just added prescription drug coupons to its coup offerings last month based on user feedback.

From an investment perspective, the ROI is still yet to be determined, but having said that, we’re optimistic given the product price points and savings opportunities that this will be one of our more popular categories in terms of user engagement,” Fagan said.

The real challenge is turning the idea into a sustainable business. There aren’t any ads on My Coupon Doc and users aren’t required to sign up, subscribe or provide any data. Instead, this startup is setting itself apart by leveraging two key distribution partnerships to bring its product to points of sale: doctors’ offices and pharmacies.

Redemption rates for drug discounts are dismal, Mehra said, because of dated distribution models. Doctors’ offices hand out paper coupons or discount cards, which are hard to remember and manage. So, My Coupon Doc is working with an EMR provider to integrate its program so that a doctor is notified that a coupon exists when he writes a prescription. That way he can decide which drug to prescribe if the patient is concerned about cost and also alert the patient that a discount exists.

Next month, My Coupon Doc will also be available in 500 pharmacies across the country through a pilot program with a company that sets up kiosks in pharmacies.

“For us, it was a no-brainer to integrate into those channels,” Mehra said. “A lot of pharmacists who know about the coupon will mention it, but then the customer has to go back home and print it out and bring it in.”

Mehra said he hopes to build in additional site features, like a way for users to manage all of their prescriptions using a calendar and to set up email reminders when it’s time to refill.

But the ultimate business goal, he added, is to get proprietary access to these discounts, which would allow My Coupon Doc to create a mobile platform and make money off pharmaceutical companies.

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