A tiny New Hampshire startup is revolutionizing the way millions of patients take their daily medicines–and threatening the business model of titans like CVS and Walgreens in the process.
Allen Pittinger-Dunham, 51, has been taking HIV medicines since 2003. A few years in, his viral counts started to creep up, and his doctor put him on a much more complicated regimen that required him to take ten pills a day. Cathy Benedetti, a 38-year-old nurse, faces a similar problem with her elderly parents, who live 1,000 miles away from her. Each of them takes at least 16 prescription drugs every day. “They were so overwhelmed,” says Benedetti. “They had literally a box of bottles, and they said every night, ‘I don’t want to deal with pillboxes.’”
The problem of medication overload is a big one. Some 32 million Americans–10% of the population–are on at least five different prescription drugs. A 2005 study found that half of all Americans on medications don’t take them properly, adding $100 billion a year to U.S. health care costs.
Pittinger-Dunham and Benedetti have settled on the same solution to the problem: a small startup pharmacy based in Manchester, N.H. called PillPack. The company sends them their prescription drugs by mail order (nothing new there), but instead of sending all the Lipitor in one bottle and the Viread in another, pills are sorted together into clear plastic wrappers printed with the date and time at which they should be taken. No more wondering if you remembered to take your Diovan or counting how many Lasixes are left in the bottle. The service–including shipping–costs customers about the same as picking up the prescription at the local pharmacy.
“It takes all the worries that I may have away,” says Pittinger-Dunham. Benedetti says: “It’s peace of mind for everyone involved.”
The idea of prepackaging pills by dosage–organizing them before they even reach the patient–isn’t new. In 2006 researchers at the Walter Reed Army Medical Center in Washington, D.C. found that by putting pills in blister packs, they upped the proportion of people who took their medicine from 61% to 97%. What is new is turning that idea into a business with the potential to rival CVS or Walgreens. PillPack cofounder and Chief Executive T.J. Parker, 29, is the son of a pharmacist and grew up working at his dad’s drugstore, making deliveries as a teenager to people who could not leave their houses. He went to school at the Massachusetts College of Pharmacy but found that he didn’t like what the business was becoming.
“It’s not that the pharmacists at CVS and Duane Reade aren’t trying to help, but they don’t have the infrastructure or tools to do anything about it,” says Parker, who was featured earlier this year in the FORBES 30 Under 30 list of young innovators. “I didn’t want to work at a traditional retail pharmacy. I wasn’t interested.”
At first Parker went to work for his dad, who had a proto-PillPack business that packaged drugs and delivered them to patients in nursing homes. But Parker saw more potential in using the Internet to take the same packaging ideas to the masses. Working on MIT’s Hacking Medicine, a hackathon for health care startups, he met Elliot Cohen, a Sloan M.B.A. In 2012 he and Cohen pitched PillPack and won the contest. Soon after, they started the company, with Cohen signing on as CTO and cofounder. Cohen had a line into the venture capital community and nabbed Founder Collective as the company’s first investor, in a $550,000 seed round.
PillPack has gone on to raise $12.8 million. The company won’t disclose numbers, but FORBES estimates the startup could hit some $15 million in revenue this year, with 15% to 20% margins. “The day we agreed on the investment, I was cooking omelets for T.J. and his wife,” says Accel Partners’ Fred Destin. “I still have a scar because I burned myself on the pan.”
At their 5,000-square-foot mill, built in the early 1900s and still with its original 6-inch-thick wood floors, patient prescriptions are fed into a robot the size of a large filing cabinet (the system is used in hospitals but hasn’t been used for consumers in the U.S. until now). The machine contains canisters of the 400 highest-volume pills used by PillPack; a pharmacist loads more unusual prescriptions by hand. Each drug is labeled by bar code and checked by both the machine and a pharmacist.
The company now employs 66 people; 15 have the sole job of helping patients transfer their prescriptions from brick-and-mortar pharmacies over to PillPack. The company is licensed in 47 states. Oklahoma, Louisiana and Oregon are the holdouts.
By focusing on only large-volume repeat customers, Parker says he’s able to stock far fewer medications than most neighborhood pharmacies, keeping costs–and prices–low. The design of the product itself is also a cost-saver, allowing the company to ship multiple prescriptions at once to a single patient. The company is creating a smartphone app that will remind patients to take their pills. PillPack has discovered that tech-savvy customers like to renew prescriptions by e-mailing instead of picking up the phone as with a traditional pharmacy.
Still, if the model takes off, won’t one of pharmacy’s big players imitate his idea? Parker shrugs off the thought. Drugstores are rated low when it comes to customer service. He doesn’t think that’s going to change anytime soon.
Besides, “people are so used to having to deal with this–the trips to the pharmacy, sorting the pillboxes, nagging the pharmacy for refills,” he says. “People who have been doing this for any amount of time are thankful that we exist.”
By Sarah Hedgecock - Forbes/July 7, 2015