This month, the NewtonX healthcare vertical examined how various tech giants and disruptive technologies are impacting the $3T healthcare sector. We’ve written about how AI is being used for drug discovery, and how tech giants including Amazon and Google are entering the space. In addition to these findings, a NewtonX survey deployed to 90 executives at the healthcare verticals of Amazon, Google, and Microsoft, as well as executives at healthcare providers including CVS and Target, revealed another trend: digital pharmacies and drug delivery services are pushing big pharma to reimagine its model of prescription fulfillment.
Pharmacies are notoriously slow and inconvenient: 40% of patients report regularly having to wait 7 minutes or more to see a pharmacist, and even after initial contact, the time to actually receiving the prescription can go up to a half hour. As consumers increasingly demand shorter wait times and more efficient processes across all verticals, pharmacies have seen decreased patient satisfaction.
Based on the survey results NewtonX identified four problems with the traditional pharmacy experience:
- Physical lines and holdups
- Phone-based communication between insurance and pharmacy slows time to actually receiving prescription
- Lack of dedicated concierge team makes communicating with pharmacies remotely difficult
Unsurprisingly, disruptive startups have also identified these problems, and are competing with incumbents to give patients a better experience.
The insights from this article are sourced from NewtonX surveys, panels, and expert consultations. To gain access to these services visit newtonx.com.
Digital, Delivered, and Disruptive: The Next Gen Pharmacies
When Amazon acquired PillPack, an online pharmacy that simplifies medication for people who take multiple drugs, the stocks of major pharmacies plummeted, as the market prepared for another e-commerce disruption. Indeed, the move did signal a major market shift: just as Amazon crushed e-commerce competition through its ease of use, wide catalog, and unparalleled shipping time, the tech behemoth could conceivably do the exact same to pharmacies — especially considering patient dissatisfaction and the fact that there’s no clear leader in the digital pharmacy space.
Startup disruptors in the space, including Capsule, Zipdrug, and PillPack, either act as on-demand digital pharmacies, or can even act as pharmacists themselves, sorting and packaging pills according to what makes sense for the patient. Digital, on-demand pharmacies aren’t just popular in the U.S.: Kfyao, a Beijing-based pharmacy platform has raised $39M, while Netmeds an online retailer of prescription medicines in India has raised $53.7M. Digital pharmacies can also lower costs for an increasingly cost-conscious and brand disloyal consumer base.
Incumbents are clambering to keep up: last year, CVS introduced same-day delivery in New York City, and is now expanding the service to other U.S. locations. Most other major pharmacies also offer drug delivery (albeit not same day delivery), and have digital portals for patients to order refills. That said, the startups still have a leg up: Capsule offers two-hour delivery, while PillPack packages prescriptions in intuitive ways and delivers monthly.
Amazon’s move into the space may not have been motivated by the PillPack product, however. According to NewtonX experts it’s likely that the move was a shortcut to getting pharmaceutical licenses throughout the U.S., as PillPack is licensed in all 50 states. PillPack could help Amazon leapfrog over the many regulatory hurdles that exist in the healthcare industry.
While Amazon already has a leg up with delivery (and even has a full-blown drone delivery fleet ready to deploy), medical distribution is only half the story. Capsule, PillPack and other disruptors also beat out competition through their digitally streamlined ordering and customer service processes. As millennials age and require more and more prescriptions, having a user-friendly digital service on mobile and web (and ideally, an app) can make a huge difference in the patient experience. Again, Amazon has a leg up in this space because of its success as an online-only retail platform, which is why its interest in the space frightened the market and incumbents alike.
Will the Startups or the Incumbents Win The Race to Digitization?
A year down the line, the competition will not actually be between startups and Big Pharma, but rather between tech giants and Big Pharma. As we’ve previously written, Amazon, Microsoft, and Google are all itching to break into the $3T healthcare market, and they have the cash and the incentivizes to successfully buy up healthcare startups. Amazon’s PillPack acquisition was the first move toward this, and certainly won’t be the last.
As Dr. Krishna Yeshwant of Google Ventures said to McKinsey, “For pharma, there comes the question of whether they can tie digital to the assets they have. There is an interesting broader conversation to have with pharmacos about moving from a products-and-pills company to a solutions company.”