Medicare: The Outrage... and a Company That Stands to Benefit

By Herb Greenberg

Tuesday, October 12, 2021

When it comes to the mess at Medicare, if you haven't done this, you have only yourself to blame...

Every year since I turned 65, I remind my friends...

Medicare open enrollment starts on Friday. But the new pricing is already up on the Medicare website... If I were you, I'd get a head start on comparing the 2022 plans with what you currently have.

Medicare does some of the heavy lifting by including the drugs you usually take, then ranking the projected costs of your drugs plus the premiums – from least-to-most- expensive for what you're likely to shell out next year.

My beef isn't with the Medicare website, which is surprisingly smooth for a government-run site. And it certainly isn't with Medicare, which I love.

It's with the prices...

It appears to me that there is a high probability you're getting ripped off if you're not going through this once-a-year-hassle.

If you're on a cocktail of meds (like I am), the chances are even greater.

It's not news that prices rise every year. But in the four years I've been on Medicare – for the very same drugs – this year takes the cake.

The most maddening part of this is the steep increase in the price of some of my generics (that's right, generics), which in some cases have more than tripled. For one drug, we're talking a difference of hundreds of dollars.

This makes zero sense.

Consider this... I put in the same prescriptions for my wife and me on the same plan and the prices were vastly different. It's nuts.

Even with shopping around this year, the cost of our Part D plans – not just the meds, but everything – will roughly triple. And that's for the cheapest plan.

And get this...

For the first time, I noticed that mail order isn't the cheapest way to go. And for me – with the plan I'm likely to choose – an independent pharmacy has considerably lower prices than CVS (CVS), the "preferred" provider.

► I posted some of my outrage the other day on Twitter (TWTR) and my personal Facebook (FB) page, and it didn't take long to hear from equally outraged friends...

Among them: Marc, a pharmacist by training who went on to start a medical products company. I figure if anybody knows this stuff, he does. His advice:

Check out GoodRx (GDRX) and compare to what your Part D will pay. I use a low cost, Part D and supplement with GoodRx. One thing that makes me crazy is that you can check your meds against the Part D plans, and then they change during the year! Main thing to look at is "specialty drug" coverage. That lack of coverage (and even with coverage) can drive you below the poverty line.

That prompted another friend to ask:

Can GoodRx be used to further lower prices you get with secondary insurance coverage?

Marc responded:

I assume by "secondary insurable," you are referring to Part D. If so, and even if it is regular insurance, it is a "take one only!" I look for what my Part D pays or covers and compare it to GoodRx. If GoodRx has better pricing or coverage, I'll use that. The pharmacist at my pharmacy (small independent) actually compares for me and selects the least expensive!

Talk about feeling like a chump...

Why hadn't I been doing that?

I had never really paid attention to GoodRx. But I did a quick check using my most expensive meds, and lo and behold, my friend Marc was right.

Then I started fiddling with various options and filters on the Medicare website, by eliminating some of the expensive drugs from the Medicare mix.

Suddenly, everything changed.

At the risk of sounding too promotional, especially for something I haven't yet spent a dime on...

It appears that by checking GoodRx for the most expensive drugs, I could save hundreds off my total projected costs, either with coupons or via mail order. (For what it's worth: I'm dubious of some of the cheapest mail order options.)

Imagine my surprise – after I had already written half of this – when I saw that my colleague Enrique Abeyta is bullish on GoodRx in his Empire Elite Growth newsletter...

I think he nailed it. We all know the drug industry, especially the seemingly irrational and incomprehensible way drugs are priced, is screwed up – and the relationship with Medicare is downright dysfunctional.

I haven't done the work that Enrique and his analyst Gabe Marshank have on GoodRx, and I note that roughly 24% of its float is sold short – suggesting that not everybody is buying the story. (To put it mildly!)

What I do know is that short of Medicare being able to negotiate prices with the drug companies – and the jury is out on that – more and more consumers (not just seniors) will be seeking out cheaper alternatives.

There's a hassle factor, for sure. But when the price differences are so great, you deal with it. And while it may ruin an otherwise perfectly good weekend, you will likely be glad you did.

Since Enrique added GoodRx to the Empire Elite Growth portfolio back in May, the stock is up 11%... and he believes there is massive upside ahead. You can find out how to get access to the full write-up on GoodRx – as well as the entire Empire Elite Growth portfolio of open recommendations – right here.

Moving on, when it comes to 'the dog ate my homework' excuse for an earnings miss, is 'supply chain' the new 'weather'?

There is no question that supply chain issues are very real and very significant on a historic level... as are some blizzards.

They're clearly playing havoc around the world with almost every company that imports critical parts or finished goods.

But as the quarters drag on, be careful about the supply chain becoming the equivalent of the weather... just another convenient excuse, as management hopes you look there, not here.

Even today, while it's hard to fault companies for blaming the supply chain, one company caught my attention: Traeger (COOK), best known for its trendy wood-pellet barbecue grills.

To be honest, I had never heard of Traeger before its initial public offering ("IPO"). But then again, I'm not a millennial... and my grill of choice at home is an overpriced Lynx.

My friend Mike, a seasoned short analyst, and I were poking around at Traeger not long ago. He happened to be in the market for one of the company's grills but was surprised to see them on sale at Costco Wholesale (COST). Even though Traeger has a "club line," the question we couldn't answer was: Why would the company put its grills on sale... at Costco... right after the IPO? Or as Mike puts it...

Why would Traeger hurt its already-ailing gross margin by discounting anything during the quarter? If demand growth is as strong as it would like us to believe (which, by the way, is the reason for the large valuation multiple at the IPO), it should have had no problem selling the available inventory at full price.

We concluded it might have been to help goose sales, so the first post-IPO earnings would be strong.

As it turns out...

Earnings were disappointing and the company blamed poor gross margins on supply chain "headwinds."

We don't doubt it, but then again, archrival Weber (WEBR) – on its first earnings report post-IPO – saw its gross margin rise. It cited its own "strong supply chain execution" in its quarter.

What's the real story? Given all the ships stranded off the coast of Long Beach in California, I'll give Traeger the benefit of the doubt. But this is definitely something to start watching more closely – if not eventually for Traeger, for someone else.

Finally, if you missed my opening salvo about what you can expect from my essays – headlined 'Welcome to My World' – you can read it here.

As always, feel free to reach out via e-mail at [email protected]. And if you're on Twitter, you can follow me there at @herbgreenberg. My DMs are open. I look forward to hearing from you.


Herb Greenberg
October 12, 2021

Whitney Tilson

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About Berna

Berna Barshay is editor of Empire Financial Daily and a contributing editor to the Empire Stock Investor and Empire Investment Report newsletters.

She graduated cum laude from Princeton University and earned her MBA from Harvard Business School in 1997.

Following her graduation, Barshay spent 20 years on Wall Street. She began her career in equity derivatives at Goldman Sachs and later worked as a buy-side equity analyst at Sanford Bernstein, where she covered global consumer cyclicals and conglomerates.

Later, Barshay spent five years working as a portfolio manager of the Ingleside Select Fund, a long/short fund with a focus on value and event-driven stocks. She later was a portfolio manager at Swiss Re, where she managed the Consumer long/short book on the equity proprietary trading desk.

She has additional experience as a buy-side analyst at several long/short hedge funds – including Sky Zone Capital, Metropolitan Capital, Buckingham Capital, and LaGrange Capital – where she primarily covered consumer and technology, media, and Internet stocks in the U.S. and Europe, with some additional work in financials and energy.

Barshay is a fashion enthusiast, a pop culture addict, obsessive indoor cycler, and prolific social media user. She currently lives in New York with her husband, daughter, and three dogs.