Uber-ScriptDrop Deal Stirs Up Already Active Prescription Delivery Space

Uber, seeking to expand its prescription delivery business nationwide, has inked a deal with pharmacy home delivery start-up ScriptDrop that makes Uber the default delivery app for a network of grocery store and independent pharmacies that spans 37 states.

The deal, which is just one of many corporate moves in the pharmacy delivery space, positions Uber to take advantage of the vastly increased consumer demand for home delivery services sparked by the pandemic.

In addition, it puts PBMs in the position of playing some catch-up on developing and promoting home delivery services beyond traditional mail order, says Ashraf Shehata, partner and advisory industry leader for health plans at consulting firm KPMG. Same-day or next-day home delivery capabilities for prescriptions have been around for a while, but the pandemic has accelerated their adoption dramatically, Shehata tells AIS Health.

“Consumers first will try home delivery, and then they’ll demand it,” he says. Not long ago, Shehata says, “it was PBMs plus retail plus health plans. Now, it’s PBMs plus retail plus health plans plus virtual plus home delivery.”

The immediate question, he says, is “as we start to see these home delivery options, are we really starting to see the digital world competing against the bricks-and-mortar world, plus delivery? That’s really the dynamic tension here. And I think that there are a lot more chapters to be written in that story.”

In the pandemic, everything has been “consumerized,” meaning meals and groceries are being delivered directly to consumers’ homes, Shehata says. “The reality is, even the footprint of retail is dramatically changing. So the question is, why shouldn’t health care dramatically change, too? I do think that the home delivery services are going to give the retail footprint a distinct advantage.”

Uber first waded into prescription home delivery last year when its subsidiary Uber Health partnered with on-demand prescription delivery platform NimbleRx in Seattle and Dallas. The company attributed its deal with ScriptDrop, announced March 24, in part to its goal of meeting needs for same-day drug delivery exacerbated by the COVID-19 pandemic.

But Uber is far from the only company investing in this space. For example, start-up pharmacies such as San Francisco-based Alto Pharmacy and New York City-based Capsule Pharmacy offer free same-day delivery service to the markets they serve, and are attracting significant investor funding. In February, Alto launched in three new markets — New York, Dallas and Houston — expanding its coverage area to more than 36 million people. Capsule delivers to New York City, Austin, Boston, Chicago, Los
Angeles and the Minneapolis-St. Paul metro area.

In addition, cash-only mail-order pharmacy Ro Pharmacy is offering more than 500 generic medications to residents in 25 states for $5 per month with free two-day UPS shipping on orders of $15 or more. Ro also offers telehealth and home-based care, and in March raised $500 million to expand its vertically integrated primary care platform.

Opportunities for partnerships and acquisitions are plentiful. Pure delivery players such as Uber can partner with supermarket pharmacies or even a PBM “to bring that last mile to the customer,” Peter Manoogian, principal at the consulting firm ZS Associates, tells AIS Health. “It’s almost like a network play that home delivery has to now be a clear part of the product offering.” He says he also expects to see continued interest in companies that divide up dosages for patients, adding that “I think you’ll continue to see PBMs make acquisitions and investments to fill the checkerboard of capabilities that they need to fill so that their health plan clients will have access to the latest and greatest technologies and capabilities.”

Meanwhile, PBMs do not appear to be reacting much to the changes in prescription delivery and purchasing patterns, which also include increasing GoodRx utilization by consumers who have prescription coverage through high-deductible health plans, says David Dross, national practice leader for managed care pharmacy consulting at Mercer. “It feels like, at this juncture, PBMs are honestly not seeing enough threat to do something different,” he tells AIS Health.

Amazon Threat Was Exaggerated

Competition from Amazon and its subsidiary PillPack hasn’t turned out to be as big of a threat as some in the industry had feared, at least so far, Dross notes. Shehata also doesn’t see Uber and Amazon as immediate threats to PBMs and mail-order pharmacy. “I think people who have been on maintenance drugs and are very comfortable with that fulfillment model will likely remain on it,” he says. “But those [younger] consumers and those who are not on multiple maintenance drugs, they might be more likely to enter into relationships with more of a delivery-based model.”

However, Manoogian notes that there are multiple deals that touch on prescription delivery, and PBMs definitely are watching. “They might not be paying attention to any one specific deal, but that’s because there are so many players out there, it’s like little fires everywhere,” Manoogian says. “I think the big fire is Amazon and PillPack, and I think my clients — PBMs and mail order pharmacies — they are thinking about the threat that an Amazon could bring in the Rx delivery space, because the Amazon delivery model is so intertwined into so many people’s lives.”

Short-Term Fills Better Suited to Retail

Many prescription benefit plans already offer same-day or next-day delivery for pharmaceuticals, Manoogian says. However, they haven’t always promoted that capability well enough that members know to use it, he says: “PBMs do need to ensure they get out the right communication to members.”

The activity around prescription home delivery, greatly accelerated by the pandemic, provides many more options for plan members, Shehata says. It also offers opportunities for PBMs and managed care organizations to tweak their benefits.

For consumers who don’t need three months’ worth of a maintenance drug, “the pharmacy is going to be a better value proposition,” Shehata suggests. Others would argue that mail order via the PBM provides the lowest rates, plus a 90-day fill, he says. Still, “if you add on delivery to retail, now you’ve suddenly added another really, really good sweetener.”

Retail pharmacies could add in additional sweeteners, such as the ability for consumers to have non-prescription products added to their home delivery order, Shehata observes. “So this can take on a much broader expansion in the health care ecosystem beyond just the pharmacy — that’s the part I’m pretty excited about.”

Ultimately, the optimal multi-channel play for a pharmacy would be to dispense the medication through a PBM but then deliver it through a delivery service, Shehata says. “But a lot of things will have to happen for that,” he adds, noting that the systems aren’t necessarily compatible and the pricing model would have to support the move.

“I totally could see a PBM partnering with a virtual pharmacy to pilot a same-day delivery service,” Manoogian says. “I think there will be room for several players in each step of the value chain here. I don’t necessarily think it’s Amazon taking everything over and putting all the players at risk. PBMs in particular will have to think about what suite of assets, capabilities and partnerships make the most sense for their customers, given where demand is today and where we might expect demand to be moving forward. There’s no doubt that home delivery will be here to stay and will be much more of a cornerstone of the pharmacy experience.”

To compete, Shehata suggests that PBMs consider broadening their scope of mail-order products to provide more online commerce options. A major retailer, such as Kroger or Walmart, could enter this space or partner with a PBM, he says, or CVS Health Corp., which already owns both the retail and the PBM capabilities, could get into this. “The retail-owned or aligned PBMs are going to be the first step,” Shehata says. “I think you might see a health plan come in next. Maybe the health plan will be the aggregator of those assets. So you might find a health plan that has a PBM — maybe they go out and cut a relationship with an online retailer or grocer with a dot-com presence. Then suddenly they become the aggregator.”

Ultimately, payers could offer two separate models: 90-day mail order delivery of chronic medications, or the retail option, with home delivery and do some “price balancing” between the two, adding in convenience fees for faster delivery potential for non-prescription products to be delivered, Shehata says.

Potentially, Medicare Advantage plans could offer prescription delivery as a benefit, Shehata notes, or waive delivery fees 90 days after a hospital discharge in an effort to improve compliance.

by Jane Anderson

Freelance Reporter Freelance Reporter

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