Amazon for medicines?
Pharma should stop saying the Amazon model is ‘not for us’, argues Paul Stuart-Kregor, but should instead consider where an integrated digital channel/supply channel model could bring benefits to healthcare systems, patients and the industry alike.
Given its ubiquity on the web, it is hard to believe that Amazon doesn’t celebrate its 20th birthday until next year. And yet when it first went online in 1995, many gave the concept of an online retailer little chance of success; certainly few envisaged the company becoming the behemoth it is today.
At first glance, Amazon is simply a mail-order company, taking its orders online, but fulfilling them much as many mail-order retailers had done before (by post; it will probably be the Amazon model which is the saviour of our universal postal service, but that is another story).
Of course, although it was, and still is, highly innovative, Amazon is about dealing direct with the consumer. This is why the pharmaceutical industry, whilst it loves to look at innovations in other sectors, has tended to think that the Amazon model is not applicable.
But that is to miss what is truly innovative about Amazon. Yes, it is marketing to consumers online; but the other two brilliant parts of the model are about the logistics and supply chain, and about data – and these could not be more relevant to pharma.
The logistics and supply chain side of the equation is already changing within pharmacy. With the advent of electronic prescriptions, the bigger pharmacies are already looking to operate big-scale hub operations. This means that instead of going to individual shops, prescriptions can go to a big ‘prescription factory’, from which they can be dispensed and sent direct to the patient, in something as close to ‘mail order’ as you could hope to see, which is something many with chronic conditions would welcome to avoid that regular trip to the pharmacy.
Big data capture
But the biggest impact of this kind of model is the opportunity to collect and use data in a much more organised and structured way. Dispensing like this allows the pharmacy to gather vast amounts of data on their patients – not just medicines use, but disease outcomes and co-morbidities. The data coming from this new channel could be vital for pharma in demonstrating outcomes for its medicines, an increasing trend in healthcare systems.
If you are going to have value-based pricing, proving those outcomes is vital, and in the absence of the ability to gather data through direct interaction with the patient, the pharmacy setting is the obvious alternative source.
That of course hands a big asset to major pharmacy chains, and the accessibility – and cost – of that data is something that should be exercising pharma right now; that has been something the high street retailers have recognised for years. But if you think about it, the industry already pays vast sums to the likes of IMS to access sales data; what the Amazon model allows is for the pharmacies to bypass such organisations and offer more – and better – data direct to pharma. And much of that is data which is not easily available to the industry at the moment, so the Amazon model could provide something new and valuable.
The second potential impact of this model concerns the supply side – the commercial aspects pharma companies are going to need to consider when they deal with these new dispensers.
The current pharmacy environment in the UK is really quite traditional – old-fashioned even. Around 14,000 retail pharmacies are supplied through wholesalers. There are few other sectors on the High Street which have changed so little, and which remain so relatively untouched by the phenomenon of e-commerce, and that situation is realistically unsustainable.
As we move more and more into speciality medicines for relatively small numbers of patients, it makes sense to rationalise the dispensing of prescriptions – and hence the collating of data – into one, or a few, central ‘hubs’, so that you can control supply and keep tabs on your limited inventory.
But it is not just about logistics; a third factor enters the equation here as well – service design. In the US, where the ‘Amazon model’ is already better established, most pharma companies invest quite substantially in pharmacy programmes – largely in speciality medicines. The ability, and inclination, of a company to make such an investment is proportional to the data that is available; if you can prove that your programme is working, you will be more inclined to invest in it.
If you talk to small speciality companies about product launch plans, virtually none considers wholesaling in any way relevant. If you only have 100 patients within a given market, you want as direct a relationship as you can with them. Given that regulation prevents this directly, the pharmacy – and a hub, not a scattered, fragmented number of individual pharmacies – is the best route to achieving that.
If you look at how Amazon operates, it has preferred partnerships with individual suppliers. Eventually the same could happen in medicines, where companies decide to partner with big-growth pharmacy businesses, because of the access to quality data and the opportunity to add value for – and get closer to – patients.
Whilst patients can’t buy medicines from Amazon (yet), demand from patients wanting to do more online, and the cost-driven waning of High Street pharmacies means this is the way that dispensing prescriptions is heading.
Is all this simple conjecture? Well, we can see the environmental factors pointing to this way of operating already occurring. The growth in dispensing hubs, the introduction of electronic prescribing, and the growth of more personalised speciality medicines, all make this way of operating more likely.
Whilst patients cannot buy their medicines from Amazon (yet), the combination of demand from patients wanting to do ever more online, and the inevitable cost-driven waning of High Street pharmacies with their inefficient use of expensive pharmacists, means that this is the way that dispensing prescriptions is heading. And that is no bad thing, if it ends up being better for the patient and the service they enjoy.
What we don’t know, of course, is exactly where this is going to go, and what the timescale will be. The fact that electronic prescriptions are already here suggests that we will see rapid change in the way that patients access medicines in the next couple of years.
So pharma has to consider the impact of all this on how they operate, and how they will engage with Amazon-style pharmacies. The industry shouldn’t view this change as a threat, but as an opportunity to build better, more personalised relationships with their patients, access better quality data with which they can demonstrate the value that their products are providing, and above all, deliver better services to benefit patients.
Notwithstanding a certain cynicism about tax planning issues, in reality there are few consumers who would seriously argue that they have not benefitted from the rise of Amazon over the last 19 years. For patients, the next few years could deliver equally game-changing benefits; pharma cannot stick its head in the sand and hope that the status quo remains – because as we know, it never does.
About the author:
Paul Stuart-Kregor is director and founding partner at Cello Health Consulting. He can be contacted at firstname.lastname@example.org.
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