For pharmaceutical manufacturers, the proliferation of online pharmacies represents both an imminent threat and opportunity for those who can effectively navigate this emerging channel.
As the late great Yogi Berra once said, “It's déjà vu all over again.” It seems the age of the digital pharmacy is here (again). An internet search for “Roman” history is now more likely to return results for erectile dysfunction. And it seems like a new player enters the marketplace every day. A number of these companies are breathing new life into multi-source generics by rebranding them under their own name. Some are founded on telemedicine services that preclude patients having to travel to a prescribing physician. Still others are focused on specific disease states or essentially digital versions of the traditional pharmacy experience.
The question remains, is PillPack a lightning strike or the reemergence of a new category? Other than the passage of time, has anything really changed since the Drugstore.com implosion? After all, PBMs still block these pharmacies from seeking reimbursement. One has to question the long-term financial viability of the massive direct-to-consumer campaigns these companies are deploying to acquire patients given generic drug margins in the era of $4 generics at Walmart.
Whether we’re seeing the early days of a new market or tech-savvy entrepreneurs making the same mistakes of the dot-com bubble, the upshot of all of this activity is an increasingly disorganized competitive landscape and thoroughly confused consumer base. Customers don’t yet understand the differences among online pharmacy brands and that confusion is likely to grow, as dozens of companies get in on the action. This includes legacy brands like CVS partnering with InstaCart on same-day delivery or the most momentous harbinger of the age of online pharmacy: Amazon’s acquisition of PillPack.
Pharmaceutical manufactures risk ceding their brand franchises to private label generics powered by digital pharmacy platforms.
For pharmaceutical manufacturers, the new age of online pharmacy represents both an imminent threat and a new commercial opportunity. Not only will brand manufacturers have to continue to contend with traditional generics post-LOE, they now find themselves competing against rebranded generics, complete with slick private equity backed marketing campaigns, seamless digital experiences, and custom-branded packaging. (As if the ever-growing expansion of formulary exclusion lists weren’t enough.) If manufacturers who have invested an average $2.6 billion in the development of a brand franchise want to avoid ceding their brands to these new digital upstarts, they are going to have to rethink not only the way they manage their LOE strategies, but also develop new e-commerce platforms to engage and retain consumers and streamline the final-mile delivery of medications into the hands of the patients who need them.
Frictionless Digital Commerce
Consumers today expect a frictionless digital commerce experience. Gone are the days of waiting three weeks for a doctor’s appointment, getting a prescription in person, driving to the pharmacy, finding parking, waiting in line, and filling that prescription before finally driving back home. As with every other corner of the retail sector, seamless digital experiences are reinventing the way patients purchase and receive medications.
The world’s largest retailer has entered the fray and more and more patients are discovering the burgeoning crop of online pharmacies, each of which feature smartly designed websites with streamlined user experiences. For millennial-aged men, numerous tele-health companies have destigmatized the process and made shopping for ED and hair loss medications almost hip. Others are extending the experience to women’s health, contact lens, and more. Patient experience in the age of online pharmacy is engaging and—in stark contrast to the traditional pharmacy model—even enjoyable. With telemedicine and online chat bots often built into the experience, online pharmacy eliminates the need for doctors’ appointments altogether. The medicine you need can be delivered to your door literally hours after you complete your online order.
End-to-End Customer Experience
From marketing campaigns to personalized packaging, e-commerce offers patients the exact same generic prescriptions they used to get through a complex and inconvenient traditional pharmacy process through a high-end, branded customer experience that is meticulously designed for utmost convenience. Online pharmacies offer opportunities for users to interact with a customer service representative at any point in the patient journey, delighting customers and maximizing conversion rates. They provide smart checkout technology with easy payment options to streamline the purchase process. It capitalizes on free shipping as a powerful customer motivator. And they design the entire experience for mobile, with the understanding that in the age of online pharmacy the overwhelming majority of consumers are interacting with brands‘on the go.’
- Customers expect a personalized experience
- Free shipping is a powerful motivator for customers
- Customers expect consistency regardless of channel
- Brands should provide as many options as possible to interact with Customer Service
- More people are using mobile for price comparisons while shopping
- Smarter checkout process with easy payment options
- Growing interest in customized packaging among consumers
This is the new face of generics in the age of online pharmacy. Homogeneous translucent orange bottles procured through a byzantine and bureaucratic process have been replaced by sleekly packaged branded containers prescribed, purchased and delivered in a matter of hours.
It isn’t just rebranded generics that pharmaceutical manufacturers have to worry about. With acquisition of PillPack and its pharmacy licensure in all 50 U.S. states, Amazon has laid the groundwork for a prescription marketplace that will fundamentally change the brand-name pharmaceutical landscape, as well. Whether or not manufacturers participate in Amazon’s prescription marketplace and/or outsource fulfillment to the company’s vast and rapidly expanding network of distribution centers, should be a carefully deliberated decision. The algorithm-driven commoditization implicit in the arrangement would likely have a significant impact on a manufacturer’s brand equity and long-term market strategy.
Pharmaceutical Manufacturers in the Age of Online Pharmacy
What happens when the consumer is trained to think about the pharmacy brand and not the medication? Online pharmacy represents a real threat to manufacturers, but within that threat exists an opportunity. Manufacturers, after all, have one thing that the new crop of fly-by-night online pharmacies don’t have: brand equity.Manufacturer brand equity and loyalty established with physicians and consumers over a product's 17-year proprietary lifecycle can be retained and even enhanced by engaging customers directly in the frictionless digital commerce model they have come to expect, complete with end-to-end customer experience.
In the age of digital pharmacy, manufacturers need a direct-to-patient platform powered by e-commerce technology, anticipatory logistics, and innovative final-mile solutions. They need to provide patients with an alternative to the fragmented and overly complex traditional pharmacy process that prevents nearly a third of all new prescriptions for patients with chronic diseases from being filled. They need an independent way to leverage customer loyalty, compete against the rise of these rebranded generics, and avoid the commoditization implicit in the forthcoming Amazon prescription marketplace. E-commerce and the age of the online pharmacy stands to represent either the most lucrative opportunity in the history of the industry or an existential threat to the brand equity that manufacturers have built over decades of being in business.
Tufts Center for the Study of Drug Development and published in the Journal of Health Economics.