In his second week on the job as president of Drugstore.com, Peter Neupert, aka Captain NeupKirk, (the name given to him during his days at Microsoft by the Star Trek fans on his OS/2 development team and resurrected when his MSNBC office featured a command chair surrounded by TV consoles), spent two days in an office situated several miles away from drugstore’s Bellevue hub.
The office, which featured a sweeping view of downtown Seattle and Elliott Bay, belonged to Amazon.com CEO Jeff Bezos. In pharmacological terms, it was the heart and nerve center of the world’s largest E-tailer. Neupert was there to study the formulary that Bezos had been prescribing to stimulate the online growth hormone of Amazon.com. Based on the consultation that ensued, the drugstore CEO would add the captain of Amazon to his short list of most valuable mentors alongside Bill Gates and Steve Ballmer.
Amazon and Drugstore share more than a .com surname. The two companies are on a similar mission. Both have carved out whole new marketplaces on the Web. Both have worked together in fashioning a distinctly user-centric experience.
But there is a fascinating difference between Amazon’s business and drugstore.com’s. Drugstore’s focus is on a set of products and activities that are very often prescribed by a third party and must be scientifically and legally validated for authenticity during the ordering process. The manner in which the order is placed, by electronic transmission, is strictly regulated and even prohibited in different states, a governmental impediment to more effective Internet commerce. Additionally, unlike a general E-tailer, the products that drugstore dispenses are routinely used up and then typically reordered. Neupert refers to it as “replenishment.” You don’t typically buy the same music or the same book over and over again. Whereas in your medicine cabinet, you typically do buy the same bottle of Tylenol, the same toothpaste, the same shampoo, and so on.
Using the drugstore.com “product” is also a matter of some consequence. Reminding patients when to take their medication and when they are going to need to prepare so they don’t run out of it is a convenience for some but it can be a lifesaver for others. Drugstore has pursued that particular panacea with Bezos-like customer-obsessiveness — through tools on the drugstore.com Website like “Your List” that make it easy to reorder products, and via E-mail alerts that notify the customer when to reorder. Today’s drugstore.com consumer can compare prices, versions (brand name vs. generic) and find related remedies and treatments. How long will it be before we are able to link the results of personal health monitoring, like cholesterol or blood sugar levels or fertility and tie those conditions to more timely personal health product management? In many ways, that day has already arrived.
Five years and three million customers since drugstore opened its virtual doors, Neupert has gone from president to chairman of the company where he now takes a long range strategic view of its next stage of growth, a long-awaited era of profitability. Seattle24x7 spoke with Peter on the health and prescription for drugstore.com and how he envisions the future of the pharmacy coming online.
Seattle24x7: Drugstore.com has empowered consumers who are concerned about their health in some revolutionary ways.
Neupert: Historically, if you go way back, consumers have relied very heavily on the doctor to do the right thing for them, and have played a somewhat passive role in managing their health care. One of the trends that has started, and I think will only increase over time, is that consumers are taking charge of directing their health care practitioner and being more of a full partner in making a set of choices going forward.
Those could be choices about treatment, choices about costs, choices about risks and others. For example, a lot of the current ideas that you hear today in terms of women’s health, whether it be about hormone replacement therapy or breast cancer treatments, have all those points very clearly spelled out. There are benefits and there are also risks to different choices that people make. As humans, we have different risk tolerances, so whether a mastectomy and radical radiation therapy is the right approach or a lumpectomy and no radiation is the right approach, these are things we must evaluate. There are statistical differences, but that doesn’t matter to you as an individual if you are in the statistical group.
Seattle24x7: How did drugstore.com go about defining what was essentially a brand new category in E-commerce?
Neupert: We did a number of simple things in the beginning, such as pricing. You can’t go walk the pharmacy aisles to see what corner drugstore A vs. corner drugstore B is charging for various drugs. We wanted to help people better understand the price difference between branded drugs and generics, about when generics were going to come on the market. We also focused a great deal of attention on providing information about interactions between drugs. We also took it to the next step and looked at interactions with vitamins and other over-the-counter medicines.
Other steps were geared to helping people manage their multiple prescriptions. Many of our customers are chronic users and manage more than one prescription. One of the features I’m most proud about is an example of how you can use technology and low-cost, two-way communications to improve the health of consumers. It’s something we’ve branded known as E-med Alert. Anytime there’s a change in status of a drug by the FDA or a recall of a particular lot or even a recall of an OTC drug that we’ve shipped to a consumer, we will send them an E-mail and advise them, “Hey, check this out, either on our Website or on the FDA Website — you need to be aware that you should either stop taking this or that you got one of the drugs that was in this lot, etc. It’s the kind of thing that really can affect somebody’s life.
Seattle24x7: What are some of the most critical differences between brick and mortar pharmacies and drugstore.com?
Neupert: Part of the challenge for neighborhood pharmacies or brick and mortar pharmacies is dispensing not just medicine but up-to-the-minute information. The pharmacy is not a private place. When you’re standing at the counter and they ask, are you on any new drugs?, people aren’t always motivated to tell them or they’re in a hurry and want to get out of there. In our environment, we allow you to keep your medical profile online and require you to fill it out before we’ll fill your prescriptions. We are very confident that the drug utilization review prior to our dispensing the drug is as good as it can be done in any environment because of the privacy aspects that we have and the fact that we motivate our consumers to give us the proper information which is much harder in the neighborhood environment.
Seattle24x7: What technical advances do you see occurring in the doctor’s office that will spur the adoption of electronic services?
Neupert: Clearly an obvious one in the pharmacy space is for doctors to have handhelds or some form of computing device in the clinic room when they’re prescribing a medication that has much more information available to them and to the consumer right there. I believe that the broader adoption of electronic prescribing devices will lead to an even greater acceptance of online pharmacies, because we can complete the loop very easily and people can get their drugs at home which is the most convenient way to do it.
Seattle24x7: Technologically, there are also a whole crop of new electronic devices that are improving personal health care, many of which are offered on your Website?
Neupert: A cholesterol monitor is one of our better sellers, as is a blood pressure monitor. There’s another device that we have that can help you change your breathing patterns to help reduce your blood pressure. There’s all kinds of things that consumers will take advantage of. I think if you look at the broad trends of alternative medicine, whether you call it herbal approach, osteopathic or homeopathic approach, those are all increasing in popularity as people try to find different solutions.
Seattle24x7: What else is driving the advent of electronic prescriptions?
Neupert: There many things that will drive a desire on the part of doctors and their payors, the insurance companies, for the use of tools in the office to get electronic prescriptions, but chiefly they are costs and quality. Clearly a number of issues arise where you can either not adequately read the doctor’s prescription or they prescribe it in a way that isn’t consistent with the person’s overall health plan, i.e., it’s not on the formulary, or it’s not consistent because the drug utilization review that checks for adverse conditions is done after the prescription as opposed to before… the more you can do that cost effectively in the doctor’s office, the more effectively, more efficiently and more quickly drugs can get dispensed.
Seattle24x7: The national health insurers: United Health Group, Humana, CIGNA, etc. have clearly demonstrated that a federal infrastucture can be achieved and can yield appropriate economies of scale. Why then do you feel that core medical institutions are state licensed rather than federally licensed?
Neupert: I think there’s a lot of politics involved. Most delivery of medicine is local. There are historical reasons why medical things are licensed and managed locally and the pharmacy was a natural outcome of that. That said, as our CFO Bob Barton pointed out in his recent testimony [before an FTC committee examining anti-competitive gov’t regulations] the states move at their own pace and have different agendas. It stands in the way of the country and many users getting the benefits of technology quickly. Transmitting scripts electronically is just one such example.
Seattle24x7: Does the federal government have a role to play?
Neupert: The federal government could play a stronger role in communicating what the state-of-the-art is, reducing the risks, and putting pressure on state boards to adopt technology more quickly where appropriate.
Hopefully, the government [and the industry] will figure out that they need to get the economic aspect of decision making into people’s own consumption in order to generate the kind of market forces in health care that will improve things. If you don’t ever have to pay for anything, or you’re not motivated to understand the trade-off between what you should pay for and what you shouldn’t pay for, the market doesn’t work. Secondly, if you’re not paying for it, you don’t have the same notion of quality. We don’t yet have the kind of quality metrics or brand metrics in health care as we do for other things in society, like what car you’re going to buy, and yet health care is as important or more important. And those things have to be put in place in order for there to be this ongoing improvement and for the doctors to know what they should invest in in terms of delivering better quality at a given price.
Seattle24x7: And the forces of change invariably meet a certain level of resistance?
Neupert: Nobody’s going to be a hero if they adopt electronic prescriptions and something goes wrong. The natural risk aversion of humans and the other agenda items that they might have going on locally allows them to move slowly and say there doing the public good.
Structurally, the fact that your health insurance is generally paid by your employer who doesn’t have the same incentives and motivations as the consumer gets in the way, and hurts our health care system today.
Seattle24x7: What is it about the Puget Sound area that has made it conducive to your success?
Neupert: It’s interesting in the NASDAQ ads lately that they are touting the Public NASDAQ 100 companies and I think of the 5 companies that I’ve seen mentioned, three of them are out of Seattle: Starbucks, Costco and Microsoft. It’s pretty impressive what has happened in Seattle if you look at what’s occurred over the past 20 years. What is relevant from our perspective historically has been that talent likes being around other talent. We were able to attract a top talent team on the technology side and on the pharmacy side, and as a result of that, we were able to get great talent from around the country to come in and stay. Both at Microsoft and at drugstore, I’ve moved a lot of people into town from either California or the East Coast, and once people get here they like it.
Seattle24x7: What’s next for drugstore.com?
Neupert: We’re excited about turning the corner to profitability. We’re excited about our improvements in both customer experience and loyalty, greater integration with brick and mortar stores to create the kind of hybird that we have in the pharmacy where you can order online and pick your prescription up at a RiteAid pre-paid and not have to wait. We look forward to being able to expand that type of activity to take advantage of existing infrastructure and deliver more value to customers. [24×7]
Larry Sivitz is the Managing Editor of Seattle24x7.
============================================
