Amazon’s New Online Mail Order Pharmacy “PillPack” Is Underway
PillPack / Amazon is pushing further into consumer health with prescription drug and mail order pharmacy services
Amazon ( NASDAQ: AMZN ) has demonstrated its ability to enter new markets and successfully disrupt them. Numerous retailer and other commercial sectors have felt their squeeze; even the logistics companies transporting products to consumers and businesses feel competitive pressure.
Amazon has been exploring the healthcare industry for much longer than many realize and is poised to strike with one of their most ambitious and unique ventures to date. A gradual increase of activity conveys PillPack / Amazon are launching their quest to forge deeper into the competitive mail order pharmacy sector of healthcare.
PillPack is an ideal platform for Amazon to build its pharmacy initiatives on…
Financially and operationally, it is an organization Amazon can easily manage and most importantly expand upon. Founded in 2013, as a younger, smaller-scale organization it has fewer legacy issues to manage and the updating of assets is simpler than if a larger, older mail order pharmacy provider with many facilities was acquired.
While the purchase price of PillPack in 2018 was initially thought to be around $1 billion, Amazon paid about $753 million for it and since then fortified it with additional commercial, clinical and operational capabilities.
Competitive snapshot…
PillPack is purely a mail order pharmacy provider for the moment, it does not have retail pharmacy service capabilities (yet!*). Their main pharmacy facility is located in Manchester, New Hampshire, with others located in Brooklyn, New York, Austin, Texas and Miami, Florida. They have business operations, design, engineering and marketing staff in Somerville, Massachusetts and an advisory center coupled with other administrative support in Salt Lake City, Utah.
Their total number of mail order pharmacies is considerably fewer than what the leading mail order pharmacies / PBMs in the United States operate. Express Scripts (owned by health insurer Cigna) has 15, OptumRx (owned by UnitedHealthcare) has 18 and CVS / Caremark (which owns health insurer Aetna) has 26.
Costco, Kroger, Walmart, Walgreens and other retailers also operate mail order pharmacies as do insurers like Humana, Kaiser and various BCBS plans (Prime Therapeutics is a mail order pharmacy / PBM owned by 22 BCBS plans).
Although they are a different business model and consumer experience, retail pharmacies are also part of the overall competitive landscape PillPack operates within.
Having a limited number of mail order pharmacy facilities is not necessarily a weakness for PillPack…
It is important to have more than one mail order pharmacy to accommodate surges in prescription volume and to serve as a backup in the event of facility, weather or natural disaster issues. If each of PillPack’s mail order pharmacies is well managed and equipped with the right automated pharmacy dispensing technology and shipping apparatus, conceivably tens of thousands of prescriptions can be easily processed, filled and shipped daily.
Based on these details and the established experience Amazon possesses in CRM plus shipping logistics to residential and business locations, PillPack has substantial resources in operations and other areas to draw from. As they generate more business, they can enrich the capabilities of their existing pharmacy operations or expand into more and / or larger facilities.
Market access / in-network pharmacy provider status…
One pivotal element in retail, mail order and specialty pharmacy is having access to patients via prescription benefit/health insurance plans. Without being a contracted provider for PBMs, MCOs / insurers and other payer plans, PillPack would likely be relegated to out-of-pocket “cash” paying customers without insurance coverage or those covered by insurers with more costly, less attractive pharmacy benefits that encourage members to price shop.
Fortunately, PillPack / Amazon will not have this issue to deal with initially. They are in an excellent position to compete for the prescriptions of patients with pharmacy/healthcare insurance coverage across the nation. PillPack is an in-network pharmacy provider with many of the leading PBMs and MCOs including:
- Aetna
- CastiaRX
- Cigna
- CVS Caremark
- EnvisionRx
- Express Scripts
- Humana Pharmacy Solutions
- MedImpact
- OptumRx
- Prime Therapeutics
This access includes being eligible to fill prescriptions for many of the larger Medicare Part D plans. Before being acquired, PillPack had done an admirable job of contracting with numerous PBMs and managed care plans before the acquisition to strategically develop a sound pipeline of customers so business momentum was established much earlier.
PillPack’s geographic limitations are of limited but potentially concerning consequence. While they are licensed as a pharmacy provider in all 50 states, they do not ship to Hawaii or international destinations at this time. For benefit plan members residing in such locales, this is a disappointment, as it will also be for some specialty pharmaceutical manufacturers as well.
PillPack and Amazon successfully combined consumer, healthcare and digital marketing expertise to develop a quality website user experience…
As expected, PillPack’s commercial website is well-designed and accounts for all the nuances of e-commerce, mail order pharmacy services and consumer engagement. They are far past initial milestones with their fully operational “PillPack, An Amazon Company” branded online experience.
The simple, effective design makes it easy for consumers to navigate the site, understand how PillPack works and conveniently register for mail order pharmacy service:
- Promotes free shipping and service; customers are charged only their copay
- Has its healthcare journal, “Folks”, with wellness and other health-focused articles (an excellent example of effective outreach/content marketing strategy) for customers
- Displays numerous customer reviews and satisfaction ratings
- Fully operational online patient registration plus email and iPhone app communications
- Live customer service support on weekdays and weekends
- Access to a pharmacist is available 24 /7
- Payment accepted via HSA and FSA accounts is noted upfront
- Alternative payment plans are offered
PillPack provides prescription transfer service and has a patient management program for those customers taking specialty medications. Their accreditations include URAC, VIPPS and other endorsements.
Getting the word out to consumers about a new mail order pharmacy provider that is part of Amazon…
PillPack / Amazon is gradually ramping up their marketing communication efforts. Avoiding a big splash is a good move to avoid being overwhelmed with the volume and falling short of service level goals and expectations. For starters these promotional measures have been deployed so far:
- PillPack television commercials began appearing in the Fall of 2018
- Amazon Prime members ( over 100 million ) are receiving emails featuring links to PillPack landing pages; some have received PillPack flyers within their package shipments
- PPC ads are actively running
- Facebook ads are actively running
- Amazon’s website now features a PillPack page
Future options for PillPack and Amazon in the healthcare sector…
Amazon has demonstrated it enjoys the challenges and successes of being an innovator. There is a great deal of speculation as to what their next steps with PillPack and their overall healthcare initiatives will be. These are initial elements to consider when thinking about PillPack’s future growth:
- *There are 500 Whole Foods stores operated by Amazon; could they use them somehow in driving PillPack’s business from a retail vantage point?
- Amazon Prime Same-Day and One Day Delivery; can PillPack align itself with this convenience in the future?
- Haven, Amazon’s healthcare partnership with Berkshire Hathaway and JPMorgan Chase, is staffing up; how may they align their work with PillPack’s capabilities?
- Alexa is being outfitted with HIPAA-compliant features and messaging; how may it support PillPack patients once these new features are in place and refined?
- Amazon’s consumer marketing, recommendation selling, logistics management and other resources are enormous; how may these be deployed within PillPack?
- What rules/standards may Amazon and PillPack have to define and enforce between themselves so patient privacy laws and regulations are always complied with?
- How may their relationships with pharmaceutical manufacturers, payers and employers evolve?
- May Amazon Web Services / AWS have plans to expand its EHR data mining software, Amazon Comprehend Medical, concerning PillPack and/or yet unnamed healthcare services and/or partners?
Moving forward…
PillPack and Amazon have room to roam in the healthcare jungle. It is a competitive space Amazon seems to flourishes where others have failed. Retail, mail order and specialty pharmacy is a challenging business. Most of the leading MCOs / health insurers have already been assertively managing prescription benefits with their own internal PBM and mail order pharmacy units. The leading pharmacy retailers likewise have opted to fortify their positions with mail order pharmacy capabilities.
Ongoing innovation by pharmaceutical manufacturers with new bio-therapies and other chronic care medications provide incredible gains in inpatient care but also boost costs. As prescription drugs eventually go generic, transaction amounts and cash flow drop accordingly which leaves less wriggle room for even small gains. The ongoing drive to eliminate rebates and chargebacks issued by pharmaceutical manufacturers further complicates the abilities to turn a profit.
While PillPack and Amazon will experience challenges as they blaze a new trail, their innovative strategies to welcome and support consumer healthcare customers with a high level of service and ability to operate their pharmacy enterprise better than competitors may be more than enough to give them a winning edge.
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