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Clicks versus Bricks, Becoming e-Pharma

Updated: Dec 16, 2019

Words by Saskia Pronk

Every year in the UK >1 billion NHS prescriptions are dispensed, mostly within community pharmacies. But, with multibillion-dollar investments making waves in the prescription market, a customer-centric alternative to standing in the slow-moving queue at the local pharmacy is fast approaching. Not only are prescriptions on the rise each year, but so is the ageing population, together creating an environment where the pharmaceutical industry must champion different delivery models.

When the world stepped into 2018, Amazon began their move into the healthcare sphere. July saw its purchase of small online pharmacy PillPack, which holds licenses to ship medications in 49 US states and a business model based on the high demand for multiple medications thus, causing shares to plunge in major pharmacy chains and pharma distributors. With 48% of the UK population on at least one prescription and 25% prescribed at least three, the UK market is clearly ripe for similar modes of disruption, and key players in the pharma value chain must evolve in order to survive.

It is clear what disruptors, like Amazon, can offer in terms of distribution and consumer reach. In fact, CEOs have voiced their support for revolutionary ventures, such as Amazon’s. Alex Gorsky, CEO, Johnson & Johnson, said in an interview: “We all know there are inefficiencies in the current system. So, whether it’s distribution, whether it’s reimbursement, whether it’s the way that we insure – all of those are significant opportunities. At J&J, we would welcome those kinds of entrants into the market.” Former Pfizer CEO Ian Read echoes this mindset: “Any system of distribution that can cut costs and get a wide availability of products to patients is something that the whole industry would be interested in.”

But in what capacity will pharma form partnerships with e-commerce disruptors? “The case for supply chain partnerships between pharmaceutical companies and Amazon is clear”, explains Ruchin Kansal, Digital Strategy Business Lead, Virtusa. “Amazon presents a viable, alternative model to the current distributor/brick and mortar pharmacy delivery model that can be more cost-effective to patients and payers alike.”

In traditional distribution channels, there are a number of profiting stakeholders, from wholesalers to pharmacies to doctors. Pharma companies have implicated these middlemen as a reason for rising prescription costs. However, e-commerce provides a direct route to the patient, lowering cost and improving patient access.

Amazon presents a viable, alternative model to the current distributor/brick and mortar pharmacy delivery model

Focussing on the current distribution model, healthcare stakeholders are warning of the impact of this new e-commerce driven pathway on high-street pharmacies. “Brick and mortar pharmacies of today will need to align their business model to changing patterns of healthcare consumption”, explains Kansal. To counter the online prescription business, many pharmacies have elevated their clinical influence through face-to-face consultations, something which is resistant to digital delivery. “On one hand, they [traditional pharmacies] have an opportunity to continue to be the ‘place’ where healthcare interactions requiring a human touch happen. For example, you can go to pharmacies today to get your vaccination or get a medical consultation”, continues Kansal, but adds “they need to invest in digitalisation of the ‘front of the store’ business model and even pharmaceuticals delivery to keep up with the times.”

This pressure and competition for digital convenience is not set to fade; according to Nasdaq, by 2040, it is thought 95% of purchases will be facilitated by e-commerce. Concurrently, with the upward demand for customer-centric medications, the healthcare and life-science industries must embrace supply chain disruptors and remain innovative. “While the potential for partnerships could range from product development to patient services, the nature of these partnerships will depend on Amazon’s ambitions in healthcare”, notes Kansal, something which is yet to be uncovered.

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