Opinion: Mail-order pharmacy market to grow significantly

July 20, 2016

Shifting patient demographics will create an ideal scenario for the online/mail-order pharmacy market in the next five to ten years.

The Internet has enabled consumers to gain an advantage when choosing goods and services.  One of those areas of high interest is the ability to obtain prescriptions by mail, ordering either by the phone or through the Internet.

Prescription sales through mail-order have endured several starts and setbacks over the past few decades because the timing of the distribution has not matched well with the desirable target audience.

Here’s how the market has evolved, and what to expect in the next five to ten years.

Mail-order market misalignment

The practice and utilization of Internet/online pharmacies began in the late 1990s. Drugstore.com was one of the first safe and fully operational mail-order pharmacy with Verified Internet Pharmacy Practice Site (VIPPS) certification and began to shape the industry.

In some marketing situations, it is an advantage to be first-to-market, but consider the seven “P’s” of marketing in regards to the Internet/mail-order pharmacy business (specifically, Drugstore.com and the first wave of Internet pharmacies).

  • Product. This is a prescription drug service utilizing an Internet-based platform to fill prescriptions and will be delivered through the mail.

  • Price. Internet/mail-order pharmacies offer competitive pricing with brick-and-mortar pharmacies.

  • Place. No brick and mortar available for patient walk-in.

  • Promotion. Advertising done through traditional media (TV, newspaper, radio), insurance company co-promotion, and direct mailing.

  • People. Patients looking to fill prescriptions without going to the local pharmacy.

  • Process. Prescription drugs called into the pharmacy or faxed, paid by credit card or check, then shipped through the mail.

  • Physical evidence. Brand new concept for the pharmacy market, evidence in works.

It’s also important to consider the market surrounding Drugstore.com’s launch: According to the Pew Internet & American Life Project Survey, only 46% of Americans (ages 18 and older) had adopted Internet use in early 2000. Of that population, 57% were ages 30 to 49, 41% were ages 50 to 64, and only 12% were ages 65 and older.

Furthermore, in 2001 only 21% of the American population made an online purchase, subsequently receiving a product through the mail.

Within the population of U.S. patients who used prescription drugs in 1998, patients ages 35 to 49 filled an average of six prescriptions a year, while patients ages 50 to 64 filled an average of 13 prescriptions and patients ages 65 and older filled and average of 21 prescriptions per year, according to the Georgetown University Health Policy Institute report released in 2002.

Despite the fact that Drugstore.com established a good reputation, it’s clear that the evolution of the market was not ready or willing to adopt the use of an online/mail-order pharmacy.

Patients ages 35 to 50 (who would have been more likely to use the Internet at that time, and therefore would have been more likely to use an online pharmacy) would have also likely had fewer physical, financial or technological limitations that would have inhibited them from going to a local pharmacy (therefore reducing the likelihood they would use an online pharmacy).

On the other hand, patients ages 51 and older who would likely have had more physical and financial limitations that would deter them from going to the pharmacy (and therefore increase uptick in online/retail pharmacy use), were also less willing to adopt the use of the Internet to purchase any product.

Next: Internet/mail-order pharmacies today

 

 

Internet/mail-order pharmacies today

The marketplace has significantly changed since 2000. While the number of patients using mail-order pharmacies has increased, there has been a noticeable slowdown in utilization over the past decade.

Between the years of 2000 and 2006, the number of mail-order prescriptions increased by 300,000 per year (to a total of 700,000 per year). On the other hand, from 2006 to 2011, the total yearly prescriptions only increased by 100,000 (to 800,000 total prescriptions in 2011).

Still, the online/mail-order pharmacy market is ready to have a positive shift due to the new wave of specialty pharmacy products, aging of our population, and the changing target market determined by online activity and purchases.

According to IMS Health, from 2013 to 2014 there was a growth of mail-order services by 36.3% for the dispensing of specialty products. Mail-order specialty products also accounted for $38.1 billion in sales for the 2013 to 2014 year. The overall sales of prescriptions through mail-order services is up by 24.9%.

This increase can be attributed to the major PBMs in the specialty pharmacy industry mandating that specialty scripts are filled through mail-order specialty pharmacies.

The anticipated shift of appropriate demographics

In the next five to 10 years, mail-order pharmacies will experience a significant increase in patient utilization and number of prescriptions being dispensed.

Although the top 15 pharmacies own 78.1% of the market, there is room for growth in the smaller pharmacies in the coming years.

The desired generation for online/mail-order pharmacies is beginning to align with the anticipated target market. The population who “grew-up” with the Internet (generation X and Millennials) are now reaching the age where an online/mail-order pharmacy would be the best option for them.

In 2013, there was an average of 12.2 prescriptions per person filled annually, according to an April 2014 report by the IMS Institute for Healthcare Informatics. In 2014, 87% of the American population was using the Internet, according to the Pew Research Center. In addition, the action of online shopping increased 49% from 2001 to 2015 (21% in 2001 to 70% in 2015) among the U.S. population ages 18 and older. Furthermore, adults ages 35 to 54 are 47% of the total population online shopping, followed by Millennials coming in at 18.6% of the total online shopping population.

In 2016, patients who are currently ages 35 to 54 years old will begin hitting the age range where many will be filling two or more medications per year. This demographic is also the age range that is currently responsible for 47% of the total purchases made online in 2014. In approximately five to 10 years, these patients will become the ideal candidates for the online/mail-order pharmacy.

Through data gathering and analysis the results are clear. The generation that is most comfortable with Internet use, online shopping, and relying on packages mailed to their house is about to intersect with the perfect demographic of patients that are filling two or more medications per month.

Andrew Lyle is the director of business development at Curexa Pharmacy.