Former VP at PillPack
- Recent trends and developments in the e-pharmacy and prescription delivery industries, including PBM (pharmacy benefit manager) dynamics
- Comparison of major players, highlighting strengths and weaknesses across business models and technology platforms – Amazon's (NASDAQ: AMZN) PillPack, Capsule, Alto and differentiation vs digital consumer healthcare companies offering Rx capabilities
- Disruption from Mark Cuban's upstart CostPlus and potential industry downward pricing pressure
- Areas for potential customer acquisition – pharmaceutical provider relations, pricing and price transparency
- 2022 outlook – consolidation and regulatory dynamics
What are some of the most important trends and developments you’ve been following in the e-pharmacy space of late?
What do you make of this shift from retail pharmacies to e-pharmacies? How are you viewing overall e-pharmacy adoption from bricks-and-mortar, and what tailwinds does this represent for the industry?
Is there a technological innovation solution to the referral problem – perhaps a strategic partnership with a provider or a data management vendor such as a Symplr or a Verifiable? What solutions could make the data more interoperable and streamline processes to convert patients?
What are e-pharmacies doing to reduce the cost of their drugs? Would partnering with a name such as GoodRx be superior to building out their own digital cost reduction solution? How do you assess their efforts to build out those capabilities organically?
Do you see longer term need for a solution such as GoodRx in the marketplace? What’s the net-net impact from utilisation by smaller players vs large players deeming them unnecessary? Is there still a clear value proposition for what GoodRx is offering?
You’ve made your views on the lobbying power of PBMs [pharmacy benefit managers] clear, but in Tuesday’s State of the Union address, President Biden discussed initiatives to reduce prescription drug pricing, including capping out-of-pocket medication costs for Medicare recipients and insulin at USD 35 per month. How should we delineate between rhetoric and actual policy changes from the executive branch?
How does the relative margin profile differ across drug types? What’s the approximate margin breakdown across maintenance drugs, generics, specialty pharma and biologics for players such as PillPack or Alto?
What is the value-add of dispensing partners such as Truepill in the prescription-filling and delivery process?
Could you juxtapose the revenue model and general strategy of pure-play e-pharmacy vendors such as Alto, Capsule and PillPack, as well as the more nascent digital consumer health tech companies offering Rx services, such as Thirty Madison, Hims & Hers and Ro?
It seems the consumer health company strategy is to build a brand recognition by going D2C, with the ultimate goal to eventually penetrate the more lucrative B2B enterprise demographic. Could there be increased competitive overlap with the e-pharmacy companies if they start to get Rx prescriptions included in employer health plans, thus reducing the need for out-of-pocket offerings?
Do you think strategic partnerships might make sense for pure-play e-pharmacy names to respond to increasing overlap or competitive threat? Are strategic partnerships feasible to share revenue in that channel, and what might such an arrangement look like?
How much of a pain point is retail pharmacy ownership of these large PBMs to the e-pharmacies, given they’re essentially stealing foot traffic? How does it impact those relationships?
What are your thoughts on the emerging trend of linking pharmacy or Rx services with primary care, such as a VillageMD-Walgreens model? How might this affect e-pharmacy players? Are they leveraging similar initiatives in the telemedicine sphere, or is it more of a headwind that might take traffic back to the retail pharmacies?
How are patient acquisition costs trending and how detrimental are these to margins? What are e-pharmacy companies doing to reduce these costs, considering payer partnerships and other avenues?
What’s important for us to understand about the payer partnership piece? In addition, what patient populations are e-pharmacy players targeting across commercial, Medicare and Medicaid?
How important to commercial success is app interface and user experience? Which vendors are ahead of the curve in this area?
We’ve discussed e-pharmacy vendors building out digital pharmacy solution capabilities to reduce costs, akin to their own mini-GoodRxs. Over what timeline could these be built out? How much of a material upfront investment will it be to build out such capabilities organically?
Many mail-order pharmacies say they can package multiple chronic medications together. That said, how differentiated is PillPack’s value proposition? To what extent can it undercut pricing competition given the deep pockets and synergies of the Amazon ownership?
Could you outline the general disruption of an upstart offering such as Mark Cuban’s Cost Plus? Do you think its discounting strategy for generics is sustainable?
Can you give a granular breakdown of the competitive landscape across names such as PillPack, Alto Pharmacy, Capsule and Cost Plus? How do relative business models, scale and market share compare?
What are the main barriers to entry for bricks-and-mortar pharmacies copying the D2C model? You suggested they enjoy market plurality in terms of prescription volumes and market share, but they must have woken up to the e-pharmacy competitive threat by now. What are they doing to build out their own prescription delivery capabilities?
How material are delivery, shipping, and logistics costs to the bottom line? What are players doing to manage these expenses?
What is your consolidation outlook for e-pharmacy names, especially the pure-plays such as Alto or Capsule? You noted some competitive pressures from retail pharmacies copying the business model, as well as players such as Amazon’s PillPack having superior capabilities. Do you think those players will IPO or get bought by a competitor? What are some likely scenario implications?
What’s your outlook for general prescription demand and pharmacy foot traffic as we enter the latter throes of the pandemic? How sticky will some of the utilisation trends for e-pharmacy channels be in a post-pandemic environment?
Is there anything especially important to highlight about the e-pharmacy and prescription delivery space that we haven’t touched on?
What’s your 12-18-month outlook for the e-pharmacy sector? What might be the most important factors to monitor over that time frame?
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