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Your Local CVS now has Stiff Competition: Pharmacies in the Era of Amazon

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Amazon has conditioned ecommerce consumers to expect near instant gratification and a smooth customer experience from start to finish. Step by step, the ecommerce giant is not only changing the way we purchase and receive goods, but it’s forcing retailers from fashion to furniture to rethink the way they operate.

Until a few months ago the drug store industry seemed to be “untouchable” by Amazon, given its highly regulated nature and complex operational structure. That perception changed when the company acquired pharmacy delivery company PillPack, a move that sent shockwaves across the healthcare industry and immediately forced big players like Walgreens and CVS into the corner.

Health tech is undergoing its own “Dot Com” boom. With startups such as PillPack fetching large funding rounds or capital infusions through acquisition, the digital health arena is driving a healthcare movement defined by convenience and personalization. For PillPack, this meant taking the burden out of managing multiple prescriptions. For other prominent digital health companies, the focus has been on helping patients with chronic disease management or initiating healthier populations by improving diet and exercise. Regardless of the niche, we’re seeing stiff competition in the consumer wellness arena as these companies grab bigger slices of the digital health pie and drive new market segments inside the category.

PillPack, which could be considered the poster child for digital health success, addresses a major issue in the healthcare space: medication adherence. Half of prescribed medication is not taken as directed and 20-30 percent of U.S. prescriptions never even get filled. While there are many barriers to adherence across populations today, some of the biggest come down to lack of knowledge regarding treatment plans, proximity to a pharmacy and poor motivation.

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PillPack has successfully accomplished what Amazon did for retail and is a harbinger for what so many other digital health startups will likely soon achieve. They’ve mastered what patients want: convenience and personalization. By packaging prescriptions by day and time, and delivering them to the patient’s door, they’ve made managing (multiple) medications simple. So, while it’s no surprise Amazon took notice, the ecommerce giant’s foray into the pharmacy space won’t come without a few challenges.

Our client UpWell Health shares an interesting perspective on the deal when CEO Alison Wistner interviewed with STAT shortly after the news broke. Simply stated, she acknowledged that online healthcare isn’t easy. “There needs to be a very high level of service and a high-touch customer experience that gets people comfortable with sharing their meds and understanding how those meds interact. That’s not a model Amazon is known for.”

Other industry voices have shared similar thoughts. Walgreens CEO Stefano Pessina stated in a recent Wall Street Journal article that “the pharmacy world is much more complex than just delivering certain pills or packages.” While the model is clearly shifting, Pessina believes the physical pharmacy will continue to be very important.

Disrupting the $400 billion industry will not be easy. Not only does this system require a shift in pharmacy perception, but Amazon will also need to navigate complex relationships with health plans and drug-benefit managers, in addition to intricate data systems and contracts.

On a larger scale, Amazon’s foray into healthcare through acquisition signals a milestone moment in healthcare consumerism: The company made a bold move indicating its intent to make a segment of the healthcare puzzle simpler. In the coming months and years, we expect to see more organizations aggressively work to solve the convenience problem we have in our healthcare system – be it through acquisition or product development – depending where they are on the growth trajectory.

There’s no doubt that Amazon has completely disrupted the retail game while simultaneously perfecting the ecommerce experience and reshaping consumer expectations.

But, will it have the same success in digital health, and more specifically, pharmacies? Only time will tell.

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