Blog May 27, 2021

The Digital Pharmacy Boom

In June 2018, Amazon first entered the world of digital pharmacy with its $753 million acquisition of PillPack, a digital pharmacy founded to help people with chronic conditions better manage their medications. Within just over a year, Amazon grew its presence in the field substantially, rolling PillPack into a new, broader initiative, Amazon Pharmacy, in November 2020. This expanded offering aims to let any Amazon customer purchase prescription medications at competitive prices regardless of their insurance status. Healthcare providers can send patient prescriptions through the service, which allows users to compare prices of their medications both with and without insurance at checkout. Customers who are members of Amazon Prime get free delivery of their medications within two days. They can also receive discounts of up to 80% on generics and up to 40% on branded medicines thanks to Amazon’s partnership with pharmacy benefits management firm Express Scripts. Amazon’s goal is ultimately to provide a full-service consumer health offering to all customers which includes in-person clinics through the expansion of its virtual AmazonCare platform to other employers.

But Amazon is hardly alone in the digital pharmacy world and the competition is substantial. The COVID-19 pandemic accelerated the ongoing shift to online prescriptions and home delivery of medications, and there have been a variety of new entrants attracting significant investment from the venture community and public markets alike. Substantial venture financing has been raised by several companies including Ro ($500 million), Alto Pharmacy ($250 million), Capsule ($200 million), Medly ($100 million), NowRx ($30 million), and TruePill ($25 million). Hims + Hers launched an initial public offering in January 2020, through a SPAC (Special Purpose Acquisition Company) reverse merger that left the digital pharmacy valued at $1.6 billion.

As the field grows more crowded, companies are looking for ways to differentiate from competitors. Some of the newer firms are selectively focusing on underserved patient populations or patients with very specific needs, with the aim of becoming the first place their customers go for anything related to healthcare. For example, NURX, which was originally founded to facilitate women’s access to birth control, has expanded its offerings to other medications and diagnostic services specific to women’s health and now provides a team of doctors, nurses and other healthcare professionals for consultations. Another is FOLX Health, which focuses on the health needs of the LGBTQ community, including hormonal treatments, diagnostic services and medications for HIV and other sexually transmitted infections, and personal health products.

Others that originally began as digital pharmacies focused on specialized markets have since broadened their missions toward full-service offerings to better compete in the digital pharmacy world. Ro, for example, began in 2018 by selling erectile dysfunction medications and hair loss supplements to men. Today, it is a broad-based telehealth company with a digital pharmacy offering dramatically discounted pricing on both human and pet medications, three online health clinics, and an in-home vaccination program. Ro is now working to expand into home-based healthcare and remote monitoring for patients with chronic conditions. In December 2020, the company acquired WorkPath, a software platform that digitally ties together a patient’s doctor with Ro’s pharmacy and its lab services partner, Quest Diagnostics. The intent is to create a personalized, end-to-end experience for customers without the need for insurance. Hims + Hers, a pair of businesses centered on men’s and women’s health respectively, and discount digital pharmacy GoodRx have also greatly broadened their offerings for health and personal care products and services. Both companies now also enable customers to schedule online telemedicine appointments with licensed experts.

At the same time, traditional pharmacies like Walgreens and CVS still control most of the $300 billion prescription drug market. To remain current, these companies are also investing heavily in digital health and home delivery services of medications. Walgreens launched its digital marketplace Find Care in 2018 to connect its customers with local and digital healthcare services. The company has since established 15 collaborations with companies like Hinge Health, Cologuard, BetterHelp Counseling, and others to provide services in areas including vision, colon cancer screening, mental health, diabetes, hearing, at-home COVID-19 testing, lab tests, musculoskeletal pain, and non-surgical back and neck rehabilitation. CVS has acquired insurance company Aetna, which will once again participate in the Affordable Care Act insurance exchanges, creating a one-stop healthcare business that offers an affordable combination of store-based and digital pharmacy services with convenient home delivery.

What impact will Amazon’s continued forays into healthcare have on more recent entries into the digital pharmacy space? What new initiatives might other competitors offer to capture a section of the market in the face of growing competition? And what other moves might conventional pharmacies like CVS and Walgreens undertake to counter Amazon’s expansion? We’ll be keeping a close watch.