Brick-and-Mortars vs Online Pharmacies

We are sure you have seen the news and read the articles regarding Amazon’s intent on breaking into the pharmacy business. This announcement has many vested in community pharmacies, small and large, asking if they can compete with this giant and other growing mail order and online style pharmacies in general. A recent J.D. Power survey¹ (2016) on pharmacy customer satisfaction found that both mail order and brick-and-mortar pharmacies are equally filling needs. Customers are turning to mail order for the convenience, and the study also showed they are turning multiple errands into one at local pharmacies – picking up groceries and getting their flu shots all while retrieving their meds. For now the answer is yes, local brick-and-mortar pharmacies can still compete on service and patient touch, but for how long?

Amazon Box

Amazon has talked about moving into pharmacy for a while now, started with online sales of OTC and it appears to be inching closer to putting online Prescription drugs plan into place. It recently hired a general manager to formulate a strategy for breaking into the multibillion-dollar pharmacy market. There is speculation surrounding the 450 Whole Foods grocery stores the company recently acquired; those locations could easily be outfitted with pharmacies. However, 450 stores is a trivial number compared to the existing 23,000 independent retail pharmacies and over 40,000 locations of the chain store segment, including Walgreens and CVS. The real opportunity and money comes from competing with pharmacy benefit managers (PBMs). Will Amazon give PBMs a run for their money or acquire and become one itself? Clearly, the online retail giant has a well-established internet-based platform that could be quickly utilized for mail order, an online pharmacy and covered lives for PBM and third-party payors use. Amazon could develop an online pharmacy and third-party payer model with pricing that will make them a game changer. Stephen Buck, an entrepreneur and co-founder of GoodRx said, “Amazon would introduce a lot of transparency to what drugs really cost. This opportunity could be a $25 – $50 billion market opportunity for Amazon if executed well.” Amazon could even work directly with manufacturers to negotiate discounts for buying in bulk, white label and repackage drugs.

Just as every brick-and-mortar retail store competes with online shopping, frequently suffering as a result, local pharmacies compete with mail order. In the near future, online pharmacies will pose an even greater threat in many regards, including, but not limited to, cost, technology integration, automation, anonymity, and around-the-clock access. As with anything, there will be pros and cons. You would still think, brick-and-mortars will remain the first option for those needing medications immediately and for the traditionalists who prefer speaking with pharmacists face-to-face.

Today pharmacies are required to have certain data points when dealing with patients, including counseling. For now, this face-to-face is convenient, but just as physicians are beginning to interact with patients remotely via the Internet, with Telemedicine and Teledoc, so too could pharmacists. Will Amazon’s Alexa and/or IBM’s Watson become new consultants when it comes to medications or act as micro prescribers? As people continue to rely on technology more and more, and as technology continues to advance exponentially on a daily basis, pharmacies will keep moving toward an online existence. Many brick-and-mortars are beginning to understand they will need to create a niche, in-store or possibly online, by specializing in today’s pharmacy market geared towards value-based care.

The question still remains – will NCPDP, and States Board of Pharmacy strongly lobby and convince the State Board of Healing art, and AMA to loosen up requirements and regulations for online pharmacy dispensing and pharmacists as a prescriber? The reality is that e-commerce is a giant in the sales industry and growing bigger and more diversified by the day. It’s only a matter of time before online pharmacies take off. Amazon may be one of many. Does that mean brick-and-mortar locations will become a thing of the past? Probably not entirely, but the industry will have to wait and see. Is your pharmacy adapting and preparing for mail order and online pharmacies?

¹ J.D. Power. (2016). Customer Satisfaction Remains High as Pharmacies Services, Delivery Methods Evolve. Retrieved from http://www.jdpower.com/press-releases/jd-power-2016-us-pharmacy-study.

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