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Pillpack business model: Amazon Initiative in pharmacy delivery

By Abhishek Goel 28th May 2022

PillPack is a famous online pharmacy business model that delivers your medicines right at your doorstep. Apart from the prescribed medicines, you also may order inhalers, vitamins, and OTC (over-the-counter) drugs such as Ibuprofen. One of the stand-out features of the online pharmacy is that the medicines come in single-serve packs that are pre-sorted.

You also get clear instructions about how the medication has to be consumed. This makes things a lot safer and easier for the patients that take several medications during the day. What is great about the PillPack business model is that the deliveries and sorting services both are free. Customers will just pay for the cost of the medicine.

How does the PillPack business model work?

One of the key elements of the PillPack business model is the PharmacyOS platform the company uses as a value proposition. This software automatically confirms the co-payments with the insurance companies and requests the refills. It warns the customers about possible drug interactions. So, the clientele is getting a streamlined service and there are fewer calling back and forth.

The patient has better control over the way their end-to-end medication plans are managed. PillPack also makes use of robots for sorting out the medications and cutting down both human errors and costing.

pillpack

Initially, the Pill Pack customers can share their prescription and insurance coverage details with PillPack by using the company’s HIPAA-compliant and secure site. Then these prescriptions are transferred to the pharmacies and distribution facilities for sorting out by using a robotic dispensing system. There are licensed pharmacists here that supervise the entire process to ensure accuracy and quality.

Then these medicines are shipped in unmarked boxes for ensuring privacy. The patients can track their orders by using the tracking numbers. Usually, the prescriptions of every customer are coordinated. This ensures that all the ordered medicines arrive at the doorstep together. Keep in mind that special requests can be made to get the urgently required medicine earlier.

The story behind the success of PillPack

The PillPack business model concept was initially brought to life by the company founders Eliot Cohen (Chief Product Officer) and TJ Parker (CEO). The two met when TJ Parker was studying to become a pharmacist and Cohen was trying to get an MBA from MIT. Cohen also holds a degree in computer science. Parker’s father was also a pharmacist and as a result, Parker understood the gaps in the market, especially in the pharmacy sector.

As a child, Parker worked at his father’s pharmacy and delivered medicine to different people at their doorstep. He understood even at a tender age how difficult it was to manage the prescriptions. This resulted in the development of PillPack making things easy for the patients to consume the right medicine at the right time and feel healthy.

Although Cohen was not a part of the scenario earlier, he changed his mind after he saw the problems faced by his father while managing his medicines. Cohen’s father had quadruple bypass heart surgery. According to a published article, the co-founders worked over a weekend to put together a prototype that won the 2012 Hacking Medicine hackathon. The rest as they say is history.

Association with Amazon

Dealing in online pharmacies appeared to be an ideal place for Amazon to start its quest. They are sure to try and dominate the healthcare sector as well. PillPack on other hand will need a minor miracle to find a better partner than Amazon. With the resources at the disposal of Amazon and the PillPack business model, this is a match made in heaven.

In 2018, the average PillPack user was close to $5000 in revenue and the average prime member spent close to $1300 every year. This association means Amazon can access the older demographic of PillPack that falls between the 50s and 60s to acquire them as customers for their products and services.

PillPack is an established and certified U.S.-based retail pharmacy and holds licenses in all the 50 states of the U.S. It would have taken several years for Amazon to acquire these licenses. The technology and know-how can be leveraged in many other areas of Amazon’s other businesses.

The services offered by PillPack will also be used by Amazon employees. This will allow the organization to cut costs and decrease the overhead. As far as PillPack was concerned Amazon could have either become a partner or a competitor. The former alternative is far more lucrative.

Amazon kicks off PillPack

The partnership, funding, and resources of Amazon have helped PillPack in expanding fast and acquire a competitive advantage over other newer players in the online pharmacy market segment. This association also means that they now have the corporate muscle required to take on the leaders in the segment such as Walmart, CVS, and WGA. Now, PillPack has gained access to more than 100 million users of Amazon. Amazon provides the company the much-needed market access to scale quickly by using its established business model.

Funding

After its inception, within the first 3 years, PillPack received $118 million in 4 rounds of VC funding. This allowed the company an opportunity to employ 500 people. Some of them included pharmacists, customer support representatives, and pharmacy technologists. These employees worked from the company’s filling center in New Hampshire. During the earlier period, the company charged a fixed monthly charge of $20.

However, the organization acquired a sufficient number of customers later which allowed them to scrap the fee. They make their money the same way as the other retail pharmacists do. This is from the filling fees for every dose. This charge is built into the cost of medicine for all big retailers such as Walgreens and CVS. The PillPack CEO TJ Parker has mentioned somewhere that the company has thousands of satisfied customers.

What’s next for Pillpack?

Amazon has been successful in dominating different retail sectors by using its now-famous business model. They used a combination of quick deliveries, tight margins, reducing variable costs, and focus entirely on the convenience of their customers. There are no indications that their association with

PillPack from the pharmaceutical sector will be any different. If reliable sources are to be believed, Amazon has made arrangements recently for trademarking Amazon Pharmacy in Australia, U.K., and Canada. This is a clear indication that the company is getting ready to spread its wings and explore the markets out of America.

The experience and know-how they have gathered from handling PillPack will come in handy for the expansion to other countries. A short while early the organization announced that it will be collaborating with another company called Crossover Health.

The idea here is to find some convenient health centers that are close to their Amazon PillPack fulfillment centers and facilities that undertake operations. First of these facilities will start operations from Texas. There are additional centers planned for the other U.S. states as well.

Amazon bought PillPack

Why PillPack?

Are you aware in the U.S. alone almost 90% of adults take some kind of prescribed medicine? An average senior citizen living in the U.S. takes 6 types of medicines each day. This means you can have millions of people visiting the pharmacies, standing in line, filling the prescriptions, etc.

They will also be required to sort their medications and ensure that they consume them at the right time. Not only that it can be a difficult thing to do if you are too sick to leave the house or you are juggling several prescriptions at the same time. To make matters worse the coronavirus pandemic has brought on several new challenges. 

Conclusion

PillPack is on a mission to change all this. They have made the entire pharmacy experience safe and convenient. Now, it is possible to get the medicines pre-sorted into a single-serve pack. You get the medicine that is labeled with the timing and date when it is to be consumed. On top of this, the medicine gets delivered right to your doorstep thanks to PillPack.

There is no more need for standing in long queues and sorting out the medications. PillPack has got all things covered. If you are planning on building an online pharmacy, get in touch with experts at Jungleworks for an appointment.

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