What's the Next Billion Dollar Pharmacy Startup going to be?
We Need to Think Beyond the Fill
Let me preface this by saying this post is more geared towards those outside of the pharmacy space, and wondering how to get into a potentially lucrative business area. After all, the $1 Billion PillPack acquisition by Amazon and their recent outreach to Prime members has caused quite the hubbub in the health sector. I get calls frequently from investors and entrepreneurs looking to get into the pharmacy space, and let me be honest: They ask pretty much the same things. Even some of the most recent pitches are very similar to each other I feel. Most of the time they want to pick my brain on where pharmacy is going or what could be possible, so with that being the case, I thought it would be better to put this article together that may help potentially interested parties.
So let's get started!
What are the main areas of interest in pharmacy I am seeing?
There are two avenues that many founders and entrepreneurs are taking in the pharmacy space. One is a product-focused model, and the other is service-based.
What is a Product-Focused Model?
Primarily, these endeavors are looking at the current model of how a pharmacy turns a profit: Drug sales. So how do you increase sales? Volume. Generally, more drugs sold = more profit (and I will not go into details on rebates, coupons, cost-reimbursement models - though I recognize those are important). These companies have figured out ways to either increase a customer base or churn out drugs faster. This includes companies providing on-demand drug deliveries, alternative packaging solutions, or other personable entreaties to entice customers to get their medications filled at their location. There are a number of companies that are going the PillPack route and doing this, or considering how to make the 'Uber' of pharmacy a possibility.
Why am I not hyped up on the Product-Focused Model?
Well, it's not really that interesting to me. Let me preface it by saying I believe it is essential, though. Drug inventory and logistical delivery to patients is a crucial role for pharmacists. But I think it's a margin that by a percentage that really can only improve small increments overall until you reach of diminishing returns. That's why we are seeing pharmacist hours being cut and payment freezes starting, its just pinching pennies at this point.
What would make a big change? Probably complete automation of the process. And by which I mean, full AI for verification of prescriptions, seamless prescribing services by prescribers, and a modality to accurately utilize automation to manage drug inventory and package it for immediate delivery. I do think this is a possibility, but when? Maybe in a century. Maybe 50 years. I don't know, but it's not now.
The most significant limitation I would say is that the legal side of things is significant. This gets glossed over by people outside of pharmacy and the health space. They do not realize how many laws protect and enable the pharmacy profession to function the way it does (both Federally and by state). You would need a lot of factors to bypass and overturn almost a century of laws in the US, and revamp the whole process on how medications get to patients, that I do not even know where to start. And don't ask me how. I am not sure it would be a good thing on the one hand, as even if you put the pharmacy profession away and downscale the number of employees needed to oversee a revamped automated process, that would lead to a lot of pharmacists without jobs, and I do not think that is a good thing. Remember that show about a chemistry teacher who wanted to make money and had almost nothing to lose? I do not think you want over 50,000 of the equivalent highly educated individuals who know how to make and compound drugs unemployed when many of them have >$150,000 in loans, and a pharmacy degree isn't exactly a way to get into any other job — just saying.
More realistically, the product-focused model could just lead to remote verification of prescriptions with automata handling everything else as well. Put a bunch of pharmacists to verify and handle communication, and have automata hand the rest would make sense from a business side of things eventually. I do not think many pharmacists would be happy with that, though, being removed from the public face. After all, most pharmacists got into this career to help people. Many already grumble in institutional settings where they are in the hospital basement.
So no, I am not a huge proponent of the product-focused model at this time based on how I hear people want to address it and where they want to take the pharmacy profession. The end conversation is treating a pharmacist like a drone at the end of the day.
So what is a Service-Based Model?
Something I don't think anyone has done very well yet for one. Essentially, let me give you some data to get this to make sense. Last year I saw a fascinating article by and Watanabe and colleagues about how much medication-related issues impact the US. The following are some snippets by you are welcome to read my original article here:
"Although widely misdescribed in the published literature and policy documents as the cost associated with 'patient nonadherence to medications,' this estimate and the preceding estimates actually reflect medical resource utilization caused by [treatment failures (TF)] and [new medical problems] that arise from nonoptimized medication use. Nonadherence to the indicated medication regimen is just 1 of multiple potential causal factors leading to a TF, resulting in downstream health services use."
This was a new one. The fact is that many people assume that the $300 billion is the result of nonadherence when it would be better to say that the cost is related to the entire range of inappropriate medication use in the United States. The authors contend that nonoptimized medication therapy may lead to more care and possibly new medical problems needing further treatment. Nonadherence is a factor, but other factors play a role in the cost of medication use. So, the spiraling cost is related to doctor visits, hospital admissions, the cost of medications themselves, etc. The authors went back and analyzed much of the past data using previous methods to estimate costs in dollars and reflect inflation for 2016 prices.
"The estimated annual cost of prescription drug-related morbidity and mortality resulting from nonoptimized medication therapy was $528.4 billion in 2016 US dollars" with a low end of $495.3 billion and high end of $672.7 billion. That is a lot of money. Also, the authors estimated that nonoptimized drug therapy results in about 275,689 deaths per year. This has enormous implications and gives more credence to companies that are tackling medication issues in the United States.
Let that sink in. There is a LOT of wasted money here. And it's not just adherence. It's the fact that most patients aren't appropriately managed. So why not have a pharmacist, the person who reviews and dispense the medication to a patient be responsible? Makes sense right?
And that's where the breaks kick in and where pharmacy, as a profession, has ground to a halt for almost the past two decades. In the early 2000s, there was this massive push for pharmacists to conduct "Medication Therapy Management" (MTM) for the rising baby boomer population who were likely to be on a slew of medications. Let the pharmacist review and communicate with providers to help guide and manage the patient's drug therapy AND GET PAID FOR IT. In fact, let's train more pharmacists to get in on this potentially new business model. Sounds cool right? Well, nothing has really panned out with that. I remember being in school and hearing that was going to be the future, and I'm still waiting. Pharmacists by and large are still on the bench (though now vaccinating as well) and pushing their drug filling process to meet metrics. Often times I think that pharmacists are one of the educated professionals in the health space that are incredibly underused. And that is why I am passionate about service-based model start-ups.
Wait, what? That didn't sound like a good sales pitch...
Look, I think pharmacists, as a profession, do a lousy job really putting ourselves out there and leveraging our abilities. We have cut down our entrepreneurial spirit. Most graduates from pharmacy schools want to go staff, go clinical, or into pharma. But that untapped knowledge I think is a make or break for the profession while I wait for automata to move us into the remote verification centers that I fear.
I genuinely believe that if some entrepreneur or investors can figure out how to get pharmacists to be a means of driving down the almost $500 billion problems and lead to better patient outcomes they could establish the next best pharmacy service that hasn't been seen yet.
Why is now a good time for this?
The reason why I do not think MTM took off almost 20 years ago is that it just wasn't the right time. It was before EHRs, and data interoperability (well, that's still a work in progress) which precluded pharmacists from access to data that could be utilized in patient care. I feel that the rise of technology, especially digital health, can reinvigorate the profession and allow us to leverage our skills to reach patients.
So what are the opportunities?
There are a bunch, and the following are general concepts I feel comfortable writing about (hey, I am not giving everything away here).
Interprofessional Communication Platforms - Creation of communication pathways between providers, pharmacists, and patients is missing. I think this would be a needed service for pharmacists to provide patient care, and it is currently missing.
Remote Patient Monitoring - This is a big one for me. Drug therapy with digital health products and sensors/wearables would be great to monitor how well drug therapy is going. Take for instance prevention. What if we use wearables as a digital biomarker for patients at risk for falls and apply the Beers List appropriately to help reduce falls for our older adults?
Chronic Disease Monitoring & Management - RPM can also fit here well. We have seen a lot of push for pharmacists to be involved in chronic disease management. I think focussing on Cardiometabolic problems in the US would be a great niche. Use wearables and sensors to collect data on blood glucose, HR, and BP to see how well a patient is doing, and use clinical knowledge to help guide that care - which is primarily focused on pharmacotherapy at this time. Yes, there are a bunch of companies entering this space, but they can only get so far with behavioral modification at the end of the day. I think pharmacists need to hit moderate-risk diseases at this time, not low risk (e.g., erectile dysfunction, birth control) as those markets are now lost to the Direct-to-consumer prescription platforms like Nurx and Ro at this time. We need to target diseases that require chronic follow-up those companies will not take on due to their models or risk.
Integrated Pharmacist EHR Systems - Most pharmacies use a 'Pharmacy Management System' to monitor drug inventory and verification and dispensing of medications, and not the clinical side of things. I haven't seen a platform taking into consideration this needs so it's an excellent place to start.
Patient Safety Oversight - Pharmacy stewardship of pharmacotherapy may be the end goal, and I think it would be an exciting concept to expand such a service.
What needs to be done?
Money and Research. There are only so many groups willing to pay a pharmacist clinical service at this time. We lack research and evidence to suggest that doing any of the above is going to drive down that $500 billion problem. So someone is going to need to put up that money and show it's feasible. And that is probably the most significant limitation for start-ups that need the time and money to show what they can accomplish. That is why so many investors like product-based model start-ups as it really doesn't shake the boat and doesn't need much evidence. But, I think that area isn't going to produce significant investments as the field gets more crowded. So if you are an entrepreneur looking to get a payor interested in paying for your service, be prepared to take on this issue. I think B2B in health is the only thing that will work longitudinally, and B2C can only work in select niches at this time.
So there you have it, my thoughts on where pharmacy needs to go. So if you want to chat more, feel free to reach out. Just don't bring me another version of PillPack or Uber. Find something that leverages this untapped potential of the pharmacist.
And if you found this all interesting, read my free E-Book on Digital Health and pharmacy, it has some interesting cases and more information on how this all could work.