Pharmacy startup Blink Health has a new approach for how it provides discounts to patients paying for prescriptions in cash.

After its relationship with pharmacy benefit manager MedImpact soured and major pharmacies left the Blink network, Blink helped set up a new middleman to manage its relationships with pharmacies, called Blue Eagle.



For healthcare startup Blink Health, shaking up the prescription drug industry hasn't gone as planned.

Two of the largest pharmaceutical chains in the US stopped working with Blink in 2017, and its relationship with its biggest business partner soured shortly after.

New York-based Blink, which provides prescription drug discounts to patients through a free app and has raised $165 million in venture funding, is now taking matters into its own hands.

Blink said on Wednesday it is creating an alternative to large pharmaceutical middlemen known as pharmacy benefit managers, which negotiate drug prices on behalf of health plans and employers. President Donald Trump in May called out the middlemen in the pharmaceutical industry as part of his plan to tackle high drug prices.

The new company, called Blue Eagle, is working in partnership with Blink to manage a network of pharmacies where Blink's discounts can be used.

"If we were going to create an alternative to the prescription management industrial complex, we needed to create a system that worked for pharmacies, worked for patients, and worked for manufacturers," said Blink CEO Geoffrey Chaiken.

In the US, patients are feeling the effect of higher drug prices. Health plans with high deductibles —the amount of money paid out of pocket before insurance kicks in — are leaving patients on the hook for close to the full price of a medication. It's led to people paying as much as a mortgage payment for a monthly supply of the live-saving diabetes medication insulin, while others have turned to crowdfunding sites like GoFundMe to cover the cost. As of 2017, there were about 28 million Americans who didn't have health insurance.

Patients are now looking for discounted cash rates as an alternative to the amount they'd pay under their insurance plan. That's where companies like Blink come in.

When Blink launched in 2016, users paid for their prescription through the Blink app and received a card, which they could then bring to the pharmacy. The pharmacy would then ring up the card and give the user his or her prescription. At the time, that included more than 60,000 pharmacies. However, in March 2017, Walgreens withdrew itself from Blink's network, meaning patients couldn't use the pre-paid prescriptions at Walgreens pharmacies. In October 2017, CVS pharmacies departed from the Blink network as well.

Blink Health is able to offer discounts by setting up a list of prices with pharmacies that it agrees to pay when a patient fills their prescription using a Blink card. That list of prices and the network of pharmacies that have agreed to it are managed by a pharmacy benefit manager.

But with the departure of the two largest pharmacy chains from its network, Blink was left in a tricky position. Blink also broke off a relationship with MedImpact, the pharmacy benefit manager it had been working with to connect with pharmacies, leaving Blink's business model in flux.

Here's how it works

So beginning this year, the company started to make some big charges.

In March, Blink made a switch to a new benefit administrator, Blue Eagle, which is run by former Express Scripts executives. Blink had a hand in creating Blue Eagle, and officially has a strategic partnership with the organization.

Blink also hired Susan Lang, the former head of supply chain at Express Scripts, as its chief strategy officer. In addition, Blink has been building up its executive ranks with other pharmaceutical and travel industry veterans including former Kayak chief marketing officer Robert Birge.

When it comes to lowering prescription costs, there are a number of different approaches startups are taking, from comparing the price at one pharmacy to another nearby, to adding on delivery components.

Blink Health operates a little differently.

Say you need to pick up a prescription for your medication, but you have a high deductible plan that requires you to pay $3,000 out of your own pocket before your insurance starts picking up the rest of the tab. Instead of going to the pharmacy and accepting whatever price they offer (which can vary from pharmacy to pharmacy), you could download the Blink Health app, or go to the company's website.

In the app, you can find your prescription and purchase it directly through the app. In return, you get a card with details about the prescription.

Then, when you get to the pharmacy counter, you show your phone to the pharmacist who rings it up instead, much like how they might ring up your insurance information. Because you've paid through Blink, you don't owe anything at the pharmacy.

Instead of having people shop around for the best price among the pharmacies in their area, Blink Health negotiates to get the same price at different pharmacies for generic medications and some branded diabetes medications. While Walgreens and CVS are no longer options, Chaiken said there are about 35,000 pharmacies — independent pharmacies, pharmacies in grocery store chains, and Walmart — that are part of the Blink network.

To sweeten the deal, if patients are willing to switch their prescriptions, 5,000 pharmacies have a cheaper, "Blink Smart Deal" option. Blink's also introduced a price-match guarantee, in which if patients can find a lower price, Blink will match it.

It's been a busy year for Blink, on both the business side and legally.

Litigation between Blink and MedImpact over the breach of contract has been ongoing since November 2017, when Blink filed a complaint alleging that MedImpact allowed major pharmacies including CVS to leave its network. MedImpact denied these allegations in March and filed a counterclaim against Blink. In May, Blink turned up the heat on that lawsuit, alleging the PBM is a "peddler of opioids." Blink in March also filed a $250 million lawsuit against a startup it claims is an "unlawful copycat scheme."