Interview, Fireside Chat
The $1B Exit - How PillPack Battled Pharmaceutical Incumbents for Market Dominance
- PillPack anticipated creating a superior customer experience in a sector previously devoid of e-commerce pharmacy players, with network access from major Pharmacy Benefit Managers (PBMs) initially viewed by investors as an insurmountable barrier comparable to a "non-issue" for independent pharmacies.
- The company projected that incumbent PBMs would only react negatively after transaction volume scaled from a $10 million run rate to $70 million, a growth trajectory expected to occur over a six to nine month period.
- Regulatory and incumbent challenges were addressed through the addition of Jim Messina to the board in late 2015 to leverage his background as Obama's deputy chief of staff.
- Termination notices from all major PBMs except Express Scripts were expected to be resolved privately and professionally throughout 2015, with coverage access maintained by other payers to avoid significant customer disruption.
- The strategy involved leveraging a "demand aggregator" role that startups cannot replicate without building a separate company, viewing the construction of a retailer without owned demand as practically impossible.
- Express Scripts sent termination notices in early 2016 but was expected to return to negotiations within 24 hours of a public relations blitz after the company faced a potential revenue collapse from approximately $100 million to zero within 48 hours.
- Resolution was expected by a Friday night following a strategy of allowing conflicts to play out rather than pursuing premature business development deals, resulting in no lost contracts and public solidification of the company's existence.
- Customer loyalty was expected to drive defense of access rights, with the conflict with PBMs projected to evolve from a potential squashing of PillPack into a partnership by September 2016, marked by the launch of a prime discount program.
- With PillPack and Amazon Pharmacy established as real players, the conflict with PBMs was expected to run its course, leaving future relationships described as sound and good.