Mail-order Pharmacy Leverages Infrastructure Online

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Pharmacy benefit manager Express Scripts Inc., St. Louis, is leveraging its mail-order expertise -- and its exclusive contracts with benefits payers -- to attempt to make its home-delivery drug business work on the Web.


Last month the company launched its online drugstore, yourPharmacy.com, with what its executives said was a huge advantage over the plethora of other Internet pharmacies that have emerged in the past year.


"We felt that the mail-order pharmacy piece was more difficult than the e-commerce piece," said Gregg Rotenberg, president of yourPharmacy.com. "That's proven to be the case as our competitors have stubbed their toes, not realizing that there are numerous challenges. The steps you have to go through before you put the product in the box are mind-boggling."


With 10 years of experience in the mail-order pharmacy business, Express Scripts is simply connecting its established mail-order service -- which uses five highly automated distribution centers and hundreds of pharmacists -- to a Web site. In addition to the complex infrastructure, which includes systems for prescription verification and a call center to handle customer questions about their medications, Express Scripts has the exclusive rights to provide insurance-covered prescriptions by mail to about 47 million patients.


Express Scripts is one of three major pharmacy benefit managers that have exclusive contracts to provide prescription drugs through the mail for thousands of insurance companies, HMOs and large employers that administer the own prescription-benefit plans. Together, the three major PBMs have about 150 million Americans locked into such contracts through their benefits payers. That means that most people cannot use their benefits to pay for prescriptions that they order through other Web sites, as long as those sites deliver the drugs by mail.


"That's the reality that a lot of online consumers have come to realize in the last few months," said James Gardner, vice president of marketing at yourPharmacy.com. "Consumers come to these sites expecting to be able to use their insurance, and they've gotten e-mails back saying their prescription is going to cost $100 or $200, and people are used to paying $5 or $10."


The PBMs lock insurance providers and employers into exclusive mail-order contracts by purchasing drugs in bulk and guaranteeing low costs to the payers.


The agreements also give the PBMs a marketing vehicle to reach the consumers.


"One of the real coups about having these relationships [with employers and HMOs] is that they are so excited about offering the service that they will do our marketing on our behalf," said Gardner. "We have equipped them with voice mail scripts, e-mails, mailing materials and a whole set of tools to make it easy for them to distribute throughout the organization. They already have the relationship. They have the existing communication channel."


The other major PBMs, Merck-Medco Managed Care LLC, Montvale, NJ, and PCS Health Systems Inc., a division of Rite Aid Corp., Camp Hill, PA, also have established mail-order operations that they are in the process of linking to Web sites.


Merck-Medco, the largest of the PBMs with about 51 million insured customers, has had an online presence for about a year offering prescription refills, although it does not yet offer first-time prescription fulfillment. The site fills about 20,000 prescriptions a month and receives about 10 million hits per month, according to Julie Mandell, a spokeswoman for Merck-Medco.


"What it's really best for is people who have chronic conditions and need to keep getting the same medication refilled," she said.


About 70 percent to 75 percent of the prescriptions filled each year are for such chronic conditions, according to Rotenberg.


Unlike Express Scripts, which communicates with its customers through the benefit providers, however, Merck-Medco sometimes sends direct mail postcards directly to its members. It also uses package inserts to direct its mail-order customers to the site, Mandell said, although the company does not promote any specific medications.


The site also recently added a content area where customers can obtain more information about prescription medications.


PCS, meanwhile, has an alliance with drugstore.com, the online pharmacy that had a stellar initial public stock offering last month and is backed by some high-profile, Internet-savvy investors. The Bellevue, WA, Internet company essentially serves as the Web arm for PCS, allowing customers served by PCS's insurance providers to use their benefits at drugstore.com, which, like yourPharmacy.com, also sells a variety of other drugstore fare like toiletries and cosmetics.


Rotenberg of yourPharmacy.com said he expected that it wouldn't be long before doctors begin authorizing prescriptions directly through the Internet from their offices, allowing customers to receive their prescriptions by mail automatically without ever venturing into a drug store at all.


"If you look out three to five years, all the experts agree, the vast majority of prescriptions five years from now will come via this electronic method," he said.
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