What Is PillPack’s Next Move?
Amazon pharmacy has established two PBM strategic partnerships in 2020
2020 is shaping up to be a year of transformation for PillPack
As the world and Amazon became engulfed in the COVID-19 pandemic, most if not all companies had to make sudden and significant changes to their 2020 forecasts and goals. For some companies, their very survival depends on it. While Amazon has hurdles to overcome in terms of sustaining inventory from suppliers and protecting its workers from the dangers of COVID-19, it is in a position to thrive from the challenges. One of their smaller units with big plans in healthcare, PillPack, is steadily and quietly moving ahead.
Amazon is steadily building a pharmacy benefit management enterprise
The PillPack business unit, which it acquired in 2018 for about $750 million, has special strategic importance. Its success widens Amazon’s ability to sell even more healthcare-related goods into households and cultivates more opportunities within the healthcare vertical for it to explore. Amazon’s Comprehend Medical, Transcribe Medical, Health Navigator and collaboration with the Pittsburgh Health Data Alliance (PHDA) are just some of the pathways it is taking towards becoming a major contender in the sector.
In 2020 Amazon has already partnered with two PBMs
CerpassRx, based in The Colony, Texas (a community north of Dallas), was founded in 2014 and is one of PillPack’s latest partnerships. One of its key attributes is its smaller size that enables it to be a nimble developer that can quickly innovate and deliver pharmacy data solutions as PillPack seeks to grow.
Its rapid success as a startup in the PBM industry also gives it competitive insights as to prioritizing client retention with a high level of service, developing innovative patient/member programs while leveraging clinical and financial analytics to lower costs and improve care.
RxAdvance, based in Southborough, Massachusetts (located west of Boston) was founded in 2013 and is another new 2020 PillPack partner. Former Apple CEO John Sculley is their chairman and chief marketing officer. RxAdvance positions itself as a tech-savvy, cloud technology-based PBM focused on accountable care organizations (ACOs) and health plans plus self-funded and government programs. RxAdvance has proved itself enough that its success has attracted modest investments from Walgreens and Centene.
Amazon making changes to its employee prescription benefit drug plan
Late in 2019 Amazon began taking a larger, more active role in the healthcare benefits of its employees. One of those steps was the launch of a medical care program that includes in-person and telehealth services for its headquarters staff in Seattle called Amazon Care.
Another step it has taken within its employee benefits programs is to begin moving some of the pharmacy plan management services to RxAdvance from outside health plans. PillPack is now the designated mail order pharmacy provider for some of them. RxAdvance was the ideal organization for Amazon to partner with to support its Amazon Care employee program and the company’s use of PillPack. Using an external PBM to manage their claims processing helps ensure patient confidentiality and meet HIPAA compliance standards.
The addition of RxAdvance plus CerpassRx gives Amazon wider clinical, financial, technical and customer service bandwidth to support this measure on a larger scale in the future as Amazon employs over 700,00 people. They also serve as the essential nucleus to develop and launch a PBM and expand beyond the original PillPack online mail order pharmacy business model.
Amazon overcoming the issues associated with ReMyHealth and SureScripts in 2019
PillPack had previously contracted with ReMyHealth as a provider of prescription data which ReMyHealth sourced from SureScripts. SureScripts is a healthcare information company that works with a variety of pharmacy data platforms. It supports the maintenance and transit of pharmacy data streams generated by claims processing from payers, healthcare provider organizations plus retail, mail order and specialty pharmacies — much of what is interwoven with other patient medical information.
SureScripts’ ownership is comprised of potential rivals to PillPack including CVS Health, Express Scripts, National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA). Before their falling out with ReMyHealth SureScripts was already being sued by the Federal Trade Commission (FTC).
The Federal Trade Commission (FTC) filed suit against Surescripts on April 17, 2019. It is suing Surescripts by alleging the company employed illegal vertical and horizontal restraints to maintain monopolies over two electronic prescribing, or “e-prescribing,” markets: routing and eligibility.
SureScripts appeal to have charges dropped by the FTC is denied
In January 2020 SureScripts was denied their appeal to have the case dismissed. The FTC is moving forward with its litigation against SureScripts. An outcome against SureScripts could greatly favor many pharmacy interests in the healthcare industry including PillPack/Amazon. Meanwhile, PillPack and Amazon circumvent the ReMyHealth and SureScripts issue with these new alliances and other measures.
AdvanceRx and CerpassRx fortify PillPack with more resources and options
RxAdvance and CerpassRx can each serve as a center of excellence to further augment PillPack’s established resources. They can provide wider clinical and financial claims processing and data analytics capabilities to deliver a truly robust and comprehensive pharmacy benefit management program. Amazon and PillPack can move forward at an accelerated pace by avoiding having to develop multiple new capabilities purely by organic means.
RxAdvance and CerpassRx benefit from gaining Amazon as a client-partner which boosts their industry visibility as well. Between the three companies, there is enormous potential for each to grow individually and collectively. The partnerships also position them to generate a greater volume of prescriptions. High volume is an important element of the PBM business as margins are slim.
What does the future hold for PillPack and Amazon in the online pharmacy and PBM sector?
Amazon is setting itself up to be a larger and more competitive player in the online pharmacy and PBM world. Once Amazon and its two PBM partners become more tightly aligned the next phase of PillPack’s strategic growth plan will emerge.
One possibility is Amazon acquiring one or both of these PBM partners and fully assimilate them into their organization. Initial partnerships are a great way for companies to get better acquainted with each other and speed integration if a merger takes place. CerpassRx could be the more likely one of the two in this case as Amazon may prefer RxAdvance to remain an outsider for employee/patient confidentiality reasons in its role with Amazon Care.
A second option is for PillPack to take on a PBM role in its Haven partnership with Berkshire Hathaway (almost 400,000 employees) and JPMorgan Chase (over 250,000 employees) or hunt other big-name clients in the PBM market sector. This could entail pursuing the PBM business of larger employer groups or health plans with or without an integrated PBM unit through a deeply discounted, truly transparent pricing program such as the one offered by the partnership between Walmart and Capital Rx.
A third option is to develop a plan for PillPack to market a custom program for hospital and health system employees. This provides them more volume plus an alternative entryway into this lucrative industry sector as a supplier which is presently tightly controlled by contracting/vendor arrangements through group purchasing organizations (GPOs), wholesalers, distributors and medical suppliers.
A fourth consideration is for PillPack to launch an exclusive and well-fortified PBM program for over 100 million Amazon Prime members. Not only would this drive prescription volume it would be a great vehicle to grow Amazon’s sales of higher-margin health and beauty products.
Elements of change, growth and competitive threat
Each of these 4 options offers growth for PillPack/Amazon. Some of them align with existing conventional pharmacy service and prescription benefit management business models. Others tilt in the direction of disruption in favor of PillPack/Amazon establishing new business strategies and upsetting the status quo. If they can deliver prescription drugs to consumers, employers or government plans at low cost with a high level of service, they will widen their access and revenue streams at the expense of long-established retail, mail order and health plan integrated PBM competitors.
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