Final-mile delivery is set to be a critical competitive battleground for the pharma industry in the age of e-commerce and instant fulfillment.
The way consumers purchase goods and services is changing by the minute. Anticipatory logistics, final-mile transportation networks, and same-day delivery services are fundamentally shifting how consumers access goods and services. New technologies and supply chain models that combine the convenience of e-commerce with the immediacy of traditional brick-and-mortar stores are the direct descendants of the biggest influencer in recent retail history: Amazon. With its rapid delivery service model, Amazon has transformed the retail landscape, along with customer expectations, establishing an aggressive benchmark of near frictionless consumer experience in virtually every industry.
To accommodate growing consumer demand for instantaneous order fulfillment, an ever-expanding array of well-financed final-mile platforms like Uber, Postmates, and Deliv have entered the fray, investing billions of dollars in the race to create crowd-sourced and asset-light regional logistics networks. These networks are designed to support the scale economies required to provide same-day delivery service in urbanized areas with dense metropolitan populations. As the new retail model expands to healthcare, it’s really only a matter of time before companies that provide car service and food delivery are playing an integral role in the distribution of pharmaceuticals as well.
- 61% of internet users would pay more for same-day delivery
- 82% of shoppers want same-day shipping options
- 64% of millennials are more likely to purchase online if same-day is an option
- 25% of shoppers would abandon their cart if same-day delivery was unavailable
Demand for Same-Day Delivery
A Supply Chain Ill-Equipped for the Future
The basic schematic of the pharmaceutical supply chain in the United States dates back to the turn of the century. Because it is inherently retrospective in nature, it is fundamentally ill-equipped to support the requirements of e-commerce platforms, including anticipatory logistics, distributed networks and home delivery. Industry pundits are quick to point out that prescription medications aren’t the same as books. And they’re right. The book industry doesn’t have to contend with the impact of entrenched middlemen, a crisis of runaway costs, poor product quality, and low consumer expectations. Would the book industry tolerate a supply chain where up to 37 percent of customer orders were never even filled?
Studies have shown that fully a third of all new prescriptions written by physicians for the treatment of patients with chronic disease are never filled. Research into the cause shows that much of the abandonment rate can be attributed to the byzantine complexity and inconvenience of today’s pharmacy process. While the complex supply chain requirements for prescription drugs differ from those for consumer packaged goods, Amazon’s entry into the pharmaceutical marketplace likely means the pharma industry is going to have to adapt to modern e-commerce models—not the other way around.
A Game Plan for the Amazon Effect
As consumer behavior continues to change, pharmaceutical manufacturers can expect competitors to respond with new fulfillment channels to meet increased customer expectations. Pharmacy Fulfillment by Amazon (PFBA) and its existing network of 150 distribution centers across the country will drive a paradigmatic industry shift in the coming years. Manufacturers need a game plan if they hope to survive the infamous “Amazon effect.”
What should that game plan look like? For starters, it needs a final-mile strategy. One option to consider for that strategy will be Amazon itself. For a defined set of service fees (as opposed to rebates and the traditional AWP, WAC and AMP gamesmanship), manufacturers will be able to advertise their brands on Amazon as well as have their products fulfilled by the company’s vast and rapidly expanding network of distribution centers. Whether or not to participate in Amazon’s prescription marketplace and/or outsource fulfillment to the company should be a carefully deliberated decision as the volume and commoditization entailed by the partnership would have a significant impact on a manufacturer’s brand and longer-term strategy.
An alternative to Amazon for pharmaceutical companies could be to partner with existing logistics companies like UPS, FedEx, or other third-party courier services to offer home delivery and position their product in regional distributions centers closer to consumers in population-dense geographic markets. The problem is that these companies don’t have the required licensure, pharmacy operations, dispensing automation, or expertise necessary to manage and dispense prescriptions to consumers at home.
An Independent, Direct-to-Patient Alternative
For manufacturers, the best alternative to partnering with Amazon is an independent solution, one that moves the traditional logistics and pharmacy process upstream in the value chain, closer to the end consumer. From e-commerce to pharmacy to final-mile fulfillment services, the best alternative to Amazon is a direct-to-patient platform that gives manufacturers faster, more efficient ways to reach patients. This anticipatory e-commerce pharmacy channel forms the backbone of the Medvantx platform.
With the industry’s only end-of-runway pharmacy, Medvantx is enabling manufacturers to reach patients anywhere in just hours. Partnering with UPS, we offer the largest dedicated healthcare storage and logistics capabilities in the U.S. Our proprietary final-mile solution and comprehensive fulfillment capabilities are designed to collapse the supply chain and bring manufacturers closer to patients.
Final-mile delivery is set to become a critical competitive battleground for the pharmaceutical industry in the coming age of e-commerce and instant fulfillment. To ensure the independence and long-term viability of their brands, especially in the face of increased formulary exclusion, manufacturers need to establish a final-mile strategy that will be able to keep pace with the evolution of consumer demand in the years ahead.