Digital Pharmacies Filling Orders Online Go After CVS, Walgreens

 Filling a prescription can be time-consuming and frustrating. There’s the trip to the pharmacy, then the wait in line. Best case, you walk away with your medication. Worst case, you learn the drug is too expensive, and you leave empty-handed. Tech companies say they can do better than the brick-and-mortar chains most Americans visit for their pills, saving customers time, money, and headaches with their apps. 

At least a dozen startups are trying to disrupt a $465 billion U.S. industry, in which sales are largely concentrated among 15 big pharmacies, led by CVS Health Corp. and Walgreens Boots Alliance Inc., according to researcher Drug Channels Institute. Amazon.com Inc. gave the emerging sector a vote of confidence with its 2018 acquisition of PillPack, which delivers prescription drugs in packets sorted by when they’re meant to be taken. The $753 million deal was a springboard that helped Amazon build a broader digital pharmacy business. Three closely watched startups, Alto, Capsule, and Medly, have together raised more than $650 million since January 2020. 

Digital pharmacies have apps that let consumers input and track prescriptions, ask questions, find help paying, and arrange for delivery. The cost of medicines is a critical issue in the U.S., where one prescription can run thousands of dollars a year. People might not have a clue how much the medication their doctor has ordered costs until they walk up to the pharmacy counter. Some of the apps help customers find discounts or programs from pharmaceutical companies that subsidize the cost of the drug. “There are huge service gaps that technology can address,” says Larry Cheng, a managing partner at Volition Capital, which is backing New York-

Each digital player takes a slightly different approach. Capsule Corp., based in New York, wants to fully replace the traditional drugstore, while San Francisco-based Alto Pharmacy LLC and Medly focus on helping patients manage the complexities of specialty medications, typically the most expensive and complicated therapies for people with chronic illnesses such as rheumatoid arthritis or diabetes. The drugs often require approval from an insurance company, and some need to be refrigerated or administered by injection. Medly is exploring the sale of anonymous customer data to drug manufacturers, which would show whether medications are helping patients, how regularly people take them, side effects, and insurance-related information.

Digital pharmacies have captured less than 1% of market share by revenue or prescriptions filled, according to Drug Channels. Alto, Capsule, and Medly aren’t yet profitable, say their founders, who couldn’t provide firm estimates for achieving that milestone. To be successful, the startups will have to provide more than just convenience, and it’s not clear what problems they’re solving, says Jan Berger, chief executive officer of consulting firm Health Intelligence Partners. “Do you want to be the digital pharmacy today competing with the new Amazon Pharmacy and Walmart offers?” asks Berger. Amazon sells six-month supplies of generic medications for as low as $6. Walmart Inc. offers free and discounted prescriptions for members of its paid Walmart+ subscription. 

CVS and Walgreens also take online orders, emphasizing same-day delivery—posing a threat to the digital pharmacies taking them on. Both companies say there will always be demand for in-store pharmacists, who can offer medical advice. “New entrants to the highly competitive pharmacy market come as no surprise to us. But CVS Health is a lot more than pharmacy—and pharmacy is a lot more than just delivering medications,” says Matt Blanchette, a CVS spokesman, in an email. Walgreens, in a statement from a spokeswoman, says it gives customers physical and digital options, highlighting same-day delivery, express pick-up in store, curbside pickup, telehealth, and 24/7 chat services.

Americans have been able to receive their prescriptions in the mail for decades. It was once seen by consumers as a revolutionary service, but interest has waned: The number of prescriptions filled via mail has tumbled 22% over the past decade and now accounts for 9% of the total, according to data from Drug Channels. That compares with a 33% increase at retail community pharmacies over the same period. The data show a small spike in mail orders in the first half of 2020 when stay-at-home restrictions were imposed, but the increase dissipated once restrictions were lifted.

If any of the digital pharmacies—big or small—can get it right, it would be a transformative moment for the industry. If nothing else, the competition could benefit patients. “Pharmacy hasn’t had any meaningful innovation for the last 50 to 100 years,” says Eric Kinariwala, founder and chief executive officer of Capsule.

https://www.bloomberg.com/news/articles/2021-07-07/online-pharmacies-go-after-cvs-walgreens-wba