Health and life science supply chain markets "ripe for digital disruption"
All signs are that the life sciences and healthcare market is ripe for disruption, with ecommerce coming into its own in the sector.
The push for online pharmaceuticals is underway with multi-billion dollar ecommerce markets opening up as you read this. Very soon, patients around the world will have a genuine alternative to receiving drugs direct from their prescribing doctor and having to wait in line to fill prescriptions at their local pharmacy. Alongside these traditional channels, a burgeoning trend in life sciences and healthcare ecommerce means patients are starting to receive insulin along with many other life-saving pharmaceuticals literally to their doorsteps.
Why now? Firstly, consumers are changing and transactions are becoming increasingly digitised. This drives the demand for ecommerce solutions, with consumers ordering and receiving products at home. In addition, physical barriers to life sciences and healthcare ecommerce are being removed. We are able to deliver essential temperature control and sensitive product monitoring throughout the end-to-end supply chain. Added to this, logistics companies have achieved both cost efficiency and sophistication in serving the so-called ‘last mile’ of delivery – the final part of the journey required to ensure an item is safely and securely handed over to the right person.
Today, I believe there are five key drivers for the intense growth of life sciences and healthcare ecommerce, all working together to change the face of our industry forever.
Providing pharmaceutical products to patients is an extremely profitable business. Recent data from the USA indicates that Walgreens and CVS make at least 70% of their profits from the pharmacy outlets, which are typically tucked away at the back of their stores. This kind of margin makes it attractive for different players to try and take a share.
In traditional distribution channels, multiple parties have always had a finger in the pharma pie: manufacturers, wholesalers, distributors, pharmacies, doctors and hospitals, even the insurance companies profit heavily as products move from the factory to the patient. Ecommerce can cut costs by creating a direct relationship between the manufacturer and the patient. Governments and regulators can see this and, as pressure is on them to reduce healthcare cost, change seems inevitable.
Take for example the new two invoice policy in China. To keep a firm grip on pharmaceutical profiteering, this system allows a first invoice to be issued by the manufacturer to the distributor. After this, the only other invoice is from the distributor to the medical service provider or institution. Cutting touchpoints is an effective way of cutting costs (and it speeds up cycle times too).
Patients are also consumers. Across many countries of the world – particularly in the vast ecommerce markets of China, the U.S.A. and the U.K. – consumers are very familiar with the convenience of online purchasing and expect consistency in their omnichannel experience. Many of these consumers are already buying healthcare supplies online – for example, they fortify with vitamin supplements and see clearly with repeat-order disposable contact lenses. Their demands are propelling life sciences and healthcare ecommerce growth.
In developing countries with an immature supply chain infrastructure, customer demand may even result in a technology skip. In the same way as Africa embraced mobile banking in the absence of accessible traditional banking services, developing countries may now leapfrog and welcome direct-to-patient delivery.
Rejection of protectionism
As technology and progress are enabling new business models, lobby groups are very involved in protecting and bolstering the existing pharmaceutical channels of large companies. These companies must decide whether to “disrupt or be disrupted”. Failure to participate can mean missing out on valuable new opportunities as an e-pharmacy. Around the world there is rejection of protectionism in favor of open access and customer centricity.
It’s not all just about prescription drugs. Many of the largest pharmaceutical companies – such as Bayer, Colgate, Johnson & Johnson and Pfizer – have huge businesses that sell consumer healthcare and OTC products in vast quantities via the biggest online platforms. Medical device companies are already selling products online to business customers so why not direct to consumers too? Of course prescription sales are highly regulated but, like the proverbial last bastion, this is sure to fall with the sheer momentum of the ecommerce movement.
All signs are that the life sciences and healthcare market is ripe for disruption. Pharmaceutical companies and medical device manufacturers will continue to deliver in volume to wholesalers and distributors but they are now also embarking on direct-to-patient delivery. Ecommerce giant Amazon is hiring health professionals. There is a big slice of the healthcare market up for grabs – and the change is happening now.
Logistics is ready to respond with services tailored to different product types. For example, in big cities, essential insulin orders placed before 12-noon will be purchased with a four-hour delivery guarantee. Meanwhile, a supply of something less critical, such as aspirin, could arrive free of charge within a two- or three-day delivery window. When submitting online prescription orders for their patients, doctors will simply specify the delivery urgency in each case.
Patients will increasingly manage their own prescription medication online, as evidenced by the home delivery and pharmacy leader in ordering and refilling of prescription medicines, which embraces both a traditional pharmacy model and a home delivery model. The life sciences and healthcare sector may have been late to adopt digitisation, but ecommerce is set to propel it forward in the very near future.