Trends disrupting pharmacy value pools and potential implications for the value chain (with abstract)
| Trends disrupting pharmacy value pools and potential implications for the value chain (with abstract) | |
|---|---|
| Published By | Articles by McKinsey |
| Publish Date | February 8, 2018 |
| Authors | Alex Sozdatelev, Shubham Singhal |
| Topics | B2B eCommerce in Pharma |
| Statistics | |
| Article Size | words |
| Diagrams | No |
| Downloadable Version | Yes |
| Reviewers | |
| Page Owner | Nikolay Sidelnikov |
| Summary Author | Nikolay Sidelnikov |
Abstract
The article Trends disrupting pharmacy value pools and potential implications for the value chain published by McKinsey in 2018 describes the changes in pharmaceutical industry that are altering the value pools and basis of competition within it and suggests three moves can help players respond successfully to these changes.
Key factors affecting the industry are listed:
- Macro trends, that include: increasing drug spend, rising consumerism and growing out-of-pocket payments, increasing difficulty for players to grow through horizontal consolidation.
- Segment-specific trends, including: decreasing growth from rebate retention, declining growth from generics, decline in revenues and profitability from pharmacy store fronts, revenue and cost mismatch for hospital systems
- Amazon’s potential entry is the third factor
Primary arguments underlie the belief that Amazon could successfully disrupt the pharmacy industry:
- The pharmacy market is sizeable and attractive enough to warrant aggressive investment.
- The economic spread across the value chain that could potentially be disrupted is large.
- There is demand for direct purchasing of drugs by consumers through an online vendor.
- An online vendor can overcome significant consumer, operational, and regulatory challenges.
- Stakeholders are willing to partner with Amazon.
- An online vendor could expand into adjacent markets to add scale to drug distribution.
Here is why Amazon can overcome significant consumer, operational, and regulatory challenges:
- He is able to meet the complex regulations and clinical requirements for direct drug distribution.
- McKinsey suggests that consumers have been less willing to make online purchases of drugs than of other retail products.
- An online vendor would have to be able to develop claims-processing capabilities for prescription drug sales and meet specific operational requirements (e.g., for controlled substances).
Stakeholders are willing to partner with Amazon because:
- A “payer” entry point exists for an online vendor.
- Pharmaceutical companies would be interested in working with an online vendor.
Than the article describes main value pools in the industry and how it might be affected:
- Wholesaler value pools
- Traditional pharmacy value pools
- PBM value pools
- Hospital infusion value pools
- Payer value pools
In the conclusion authors give the following recommendations to value chain participants:
- Pursue business models that deliver a lower total cost of care for consumers and employers.
- Leverage data aggregation and big data analytics to generate insights and create value, as players in other industries have done.
- Put the consumer in the center, and be innovative in bringing more consumer insights-driven insights and actions into your business.
Full article: Trends disrupting pharmacy value pools and potential implications for the value chain