In some circles, the word “disruption” can have a negative connotation. If a stand-up comic or a musician is disrupted during their set, they are not likely to be very pleased.
If a teacher or professor is disrupted while in the middle of an engaging lecture to their students, they would likely not be happy with this fact. However, the word “disruption,” when referenced in relation to health care, is being seen as a desirable end goal to health systems and organizations.
The University of Pittsburgh Medical Center (UPMC), headquartered in Pittsburgh, PA, has become a dominating force in health care within the Western Pennsylvania region and can attribute continued statewide, regional, and international expansion as a component of their current and future dominance. At the core of their growth is a desire and vision to disrupt health care as we know it.
In reference to UPMC’s recently unveiled plans to build 3 new specialty hospitals within the city of Pittsburgh, CEO Jeffry Romoff said the hospitals will show “a dramatic advance in the way UPMC delivers the highest quality health care in the region, across the commonwealth and globally that will radically transform and disrupt health care as we know it.”
Kaiser Permanente, headquartered in Oakland, California, is an equally dominating health care organization across the country that takes an equally optimistic view on disruption as being a good thing for the health care industry. In an interview with Hospitals & Health Networks, Kaiser Permanente CEO Bernard Tyson likens the expansion and adoption of value-based contracting and the move to make health care more affordable and inclusive as equally disrupting measures in the field that health care sorely needs.
Although it is clear how a health care system can use value-based contracting, point-of-care changes, and specialty hospitals as ways to disrupt the status quo in their regions and the field overall, the idea is often not directly transferrable to the field of pharmacy. However, one recent revelation taking place in the field of pharmacy could not cause a larger disruption than it already has even if it tried.
Amazon, with its announcement to purchase PillPack, sent the stock prices for Rite Aid, Walgreens and CVS Health plummeting. The prices slowly recovered a bit in the weeks following, but this announcement sent shockwaves throughout the industry.
The retail pharmacy space is rightfully worried. PillPack’s business model is to supply medications in a pre-sorted, organized, packaged manner to the millions of patients in the US population who currently take multiple meds. With the growing problem of polypharmacy, the number of people in PillPack’s target market will be ever increasing.
With Amazon’s built in supply-chain infrastructure and efficiencies, they are perfectly positioned to expand upon PillPack’s existing success. Further, with their large bargaining and buying power, in the future we may see Amazon directly negotiating with drug manufacturers, further making this deal a disruption in the pharmacy space.
With this bold acquisition, Amazon is positioning itself to be a direct competitor of multiple layers within the medication supply chain so to speak, including retail pharmacy chains, pharmacy benefit managers, and distributors. As we know, CVS Health currently operates the nation’s largest specialty pharmacy.
With a portion of their specialty drug fills coming from what some term the “specialty-lite” area, in which the high-touch, involved care is not necessarily required to the extent for other specialty or orphan drugs, Amazon’s acquisition of PillPack could eventually affect the CVS Specialty business space, in addition to their retail space.
With so many specialty medications currently in the drug pipeline, potentially the future could hold a shift toward 2 realms of specialty types. One of these types is the newer, higher-touch products (such as those for orphan diseases) and the second is a lower-touch, specialty-lite model in which agents that are older, with simpler dosing regimens and less manufacturer-mandated reporting guidelines are funneled into this category.
This second category could lead to an opportunity for an entity such as Amazon, who is now gaining a foothold in the space, to move into the acquisition (through bargaining power with manufacturers) and distribution (through PillPack) of specialty-lite medications.
Relating to this idea, in 2017, there was a total of approximately $ 412.6 billion in nationwide prescription revenues. Of this figure, $ 135 billion came from mail-order sources (PillPack will compete here) and more than $ 138 billion came from the dispensing of specialty medications from retail, mail-order, long-term care, and specialty pharmacies.
An article by Drug Channels estimated that specialty drugs accounted for one-third of the US pharmacy industry’s total prescription dispensing revenue in 2017. Can anybody else see an overlap or correlation? Although the author of the article, Adam Fein, PhD, may disagree with me (and I would tend to lean towards his opinion), I suspect Amazon has its eye, long-term, on the specialty pharmacy market—perhaps through the purchase of an (amazingly!) still independent specialty pharmacy or through its PillPack-enabled mail-order channels.
About the Author
Lee Feigert earned his PharmD from Duquesne University in Pittsburgh, PA. For over five years, he was employed in a transitional-care pharmacist role at a 300+ bed inpatient psychiatric hospital. Currently he is employed as a consultant pharmacist for a Program of All-Inclusive Care for the Elderly (PACE) program in Pennsylvania. He is currently enrolled in the Master of Science in Pharmacy Business Administration (MSPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medici
"Pharmacy|Nutrition" – Google News