Why Health and Pharma Are Poised for E-Commerce Disruption

a medical professional providing remote health advice and services

Back when e-commerce first emerged as a viable solution for business-to-customer sales, there were platforms such as Shopify, Amazon, and eBay that allowed e-commerce merchants to set up websites and inventory digitally and sell items and goods online in a unique way. These days, most of that is old news to us, but there are still markets that are making that shift.

While pharmaceutical distribution may vary from country to country, all of them are subject to factors that make competition in the digital health market a complicated matter. Medications are one of the newest categories of goods that can be sold online, but there are a few marked differences between this and other goods for sale in the e-commerce space.

There is more bureaucracy, fewer buying and selling options, and more restrictions on what certain entities can sell without running afoul of regulations.

Recognizing those differences and harnessing them to your benefit will go a long way in anticipating and responding to the evolution of the old pharmaceutical supply chain, which has been underway since 2018 when Amazon acquired PillPack for $753 million — which prompted sharp falls in the share value of companies such as CVS, Walgreens, and RiteAid.

PillPack’s market appeal was due to the fact that the company had obtained a license to sell prescription drugs in all 50 of the United States and was designed to be digital from the start, something few of its competitors was poised to tackle.

Opportunities and Regulations

As the digital health e-commerce space continues to expand, new opportunities are emerging that enable companies to act for the public good by making healthcare accessible online — which is even more important now than ever!

Before we dive into the emerging opportunities available in this industry, it’s important to understand the dynamics that have, historically, made it difficult to enter the digital health e-commerce space.

Regulatory issues and HIPPA compliance are the largest factors that complicate the delivery of telehealth services. When Congress adopted the Health Insurance Portability and Accountability Act in 1996, it was intended to protect patient records. However, HIPPA also complicates a patient’s ability to access their own health records and transfer providers.

These requirements, as much as they seem riddled with red tape, are hurdles that are quickly being overcome by an environment now rapidly trending toward a patient-centric model.

Earlier this year, the Office of the National Coordinator for Health IT adopted new federal data-sharing rules that enable patients to access their health information and share it with third-party apps. This, more so than any other factor, will drive a patient-facing telemedicine economy and make it easier for direct-to-consumer (DTC) companies to capitalize on this trend.

Leverage Niche Market Limitations

With the onset of the Covid-19 crisis, consumers in nearly every industry moved online. E-commerce activity surged across all industries and platforms, from food and beverage to home improvement and maintenance. The healthcare sector is no exception; the recent global challenges have driven the development of new healthcare delivery, including not only pharmaceuticals but also telehealth options like appointments, consultations, and diagnoses.

The challenge associated with this particular e-commerce niche is that, unlike general e-commerce, there is more red tape associated with the digital health space. Depending on any number of factors, prescriptions can’t be filled or delivered, or doctors can’t be contacted to prescribe certain medications. All of this provides a barrier to consumers who are looking for immediate solutions to their health concerns.

Despite these limitations, the digital health industry continues to boom, though anyone invested in this form of e-commerce must be aware of the regulations and official procedures that accompany the launch of these products.

For those entering the e-commerce space who are interested in marketing within the digital health niche, it’s important to be aware of how one can leverage these limitations to turn a profit while not running afoul of regulations.

Building End-to-End Solutions

Selling directly to patients through a DTC telehealth brand sounds attractive, but starting without a base knowledge of the resources needed can be daunting, solely because of all the components that need to be considered when beginning this kind of venture. Building the solution is by far the trickiest part — but it is by no means impossible.

Pharmaceutical companies typically delegate key areas of the customer journey to other parties, both because of legal concerns and because these areas lie outside the pharmaceutical company’s area of expertise. In order to be successful, an end-to-end solution must encompass telehealth, distribution, prescription, digital marketing and experiences, and omnichannel capabilities.

Ultimately, a DTC telehealth organization serves as the intermediary between a patient and a doctor. It is these companies that work with patients and providers to acquire and distribute the medication or resources needed to improve patient quality of life, whether that’s through skincare, prescriptions, or appointments.

Now, more than ever, it’s easier to overcome this complexity by providing a fully-integrated patient solution and moving to direct marketing and e-commerce-specific ad units.

Many digital health companies are focused on subscription prescriptions, a model where pharmaceuticals are distributed to customers on a regular basis (usually monthly or quarterly). While this is the most popular option, there are a whole host of factors that need to be considered, including but not limited to shipping and tracking, HIPPA compliances, patient portals and other software, and state-specific certifications.

That said, capturing a product that requires consistent customer renewal is a great way to enter the digital health e-commerce space and can pave the way for entrance into complementary areas.

Expanding Horizontally

After designing and building a DTC telehealth brand — and all the software and infrastructure it demands — expanding brand offerings through strategic marketing is easier than you might think.

Exploring alternate forms of pharmaceutical intake, such as working with compound pharmacies to create gummies, patches, alternate flavors, gels, and creams, is one lucrative option many digital health e-commerce brands choose to pursue. Others elect to expand within a certain space, such as women’s health or men’s skincare.

The important thing to consider when seeking horizontal expansion is the longevity of your customer base. Expanding in accordance with your core customers’ needs and interests is paramount in order to ensure the longevity of your brand.

For digital health e-commerce companies in this area, the direct-to-consumer space is likely the future of the pharmaceutical industry. While the barriers to entry are higher due to large corporations like Amazon, that can be leveraged in your favor because your brand will be more easily differentiated among the rest.

Then, once you establish your core brand, branching out to adjacent niches will be far easier than you think!

Cathy Tie

Cathy Tie is the CEO and founder of Locke Bio, a plug-and-play platform for enterprises to launch DTC telepharmacy services. Before founding Locke Bio in 2019, Cathy was a Partner at Cervin Ventures, a $100M technology investment fund based in Silicon Valley. Prior to Cervin Ventures, Cathy was the CEO and co-founder at Ranomics, a venture backed company known for its gene variant synthesis platform that enables antibody optimization, drug target validation, and enzyme, protein and organism engineering.

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