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October 2, 2020
Eric Kinariwala, a former financial analyst, recalled an experience in 2015 when picking up a prescription turned into a mini-debacle.
First, he couldn't find the pharmacy itself, which was tucked away in a dingy basement. Then he ended up standing line for a full hour before finding out that the medication was out of stock.
"Everything you can think of going wrong went wrong," he said.
The experience inspired Kinariwala to found Capsule, an app-based digital pharmacy offering free, same-day prescription drug delivery by courier in New York City, Boston, Chicago, and Minneapolis.
The New York City-based company was growing prior to the pandemic, but in recent months, as more patients flocked to digital healthcare options, prescription drug delivery became an easy choice for consumers.
"Starting in mid-March, we saw this absolute surge of demand from both new customers and existing customers," Kinariwala said. "It went from something that was a convenience to something that became essential as people became very wary of leaving their homes."
Kinariwala said there was a fivefold weekly increase in new customers switching their prescriptions over to Capsule in March.
The demand wasn't just coming from consumers. Pharmacies suddenly wanted in on the delivery market as well.
"Overnight, pharmacies started to understand that they needed delivery," said Amanda Epp, CEO of ScriptDrop, a prescription drug delivery service that partners with both chains and independent pharmacies. "They needed a resilient and reliable delivery company, and consumers were demanding it because they didn't want to go to the pharmacy."
The sudden demand helped overwhelm pharmacies' long-held concerns about losing extra sales that come when customers come into the store.
"Last year, pharmacies already offered delivery or knew that they wanted to offer delivery, but they were still wrestling with the idea of losing foot traffic," Epp said. "That's what really changed."
This acceptance was crucial for ScriptDrop, which doesn't have in-house pharmacies like Capsule. Epp sees the company as helping pharmacies compete with the likes of Amazon, which entered the market in 2018 with its acquisition of online pharmacy PillPack.
Other major companies are crowding into the space as well. UnitedHealth Group, one of the largest insurance companies in the U.S., has acquired DivvyDose, according to a CNBC report. The startup delivers pre-sorted drug orders to patients with chronic illnesses.
Beyond helping patients during the lockdown, Kinariwala pitches Capsule as a way for patients to have a more direct relationship with their pharmacists, allowing them to schedule specific meeting times.
"How do you get personalized expert advice about your medication or your insurance when there's all these people around you hearing all your questions?" He posed.
Another potential advantage for these companies is that mail-order pharmacies, which have dominated the prescription drug delivery market for decades, took a hit in recent months due to USPS delays.
A Senate report released this month found "significant delays" in the delivery of prescription drugs since Louis DeJoy took over as postmaster general, "putting the health of Americans in danger," it read.
In addition, a recent report from market research firm Ipsos found that one in five Americans got medication through the mail in the last week, and a quarter of those experienced a delay or non-delivery.
But the move away from mail-order has been years in the making, Kinariwala said.
"Mail-order pharmacies have lost share over the last 20 years," he said. "Agnostic of anything with the postal service, people were already moving away from mail-order pharmacies."
The key to long-term success in this industry, he added, has less do with delivery — which has been available in some form for years — but rather the customer service possibilities of a "seamless, digital" experience.
"The magic isn't, 'I can get this thing delivered,'" he said. "The magic is that it's totally on my phone. It's seamless. I can access the pharmacist when I want. I have price transparency, and we also happen to deliver."
The USPS delays nonetheless highlight the increased sensitivity that comes with delivering prescription drugs as opposed to other products.
"We understand that prescriptions are different than delivering food," Epp said. "Prescriptions need a lot of care. You need to understand the chain of custody."
This requires close digital tracking of all orders, from when they leave the pharmacy to the moment they get into a patient's hands.
"Consumers now know because of COVID that prescription delivery is an option, whereas before they didn't know," Epp said. "They were okay with going to the pharmacy. Now it's here. They understand."