The existential threat to drug store pharmacies: the battle of price and quality

CVS recently announced its Pharmacy Savings Finder, a tool that promises to identify the cheapest version of a medication that a patient can buy. Essentially, they are promising to do comparison shopping for you. It seems to be a long awaited counter to a four front battle. Not only is CVS competing with other pharmacies, but also online Rx websites, startups and, more recently, large corporations.

Long before CVS’s Pharmacy Savings Finder, there was Walgreens’ Prescription Savings Club, Walmart’s generic prescription program, and various other brick-and-mortar players offering to find savings for consumers. So why the sudden urgency to take action and join the price wars? The rising cost of healthcare is not new news, and remains a chief concern for the poorest and the sickest. One possible catalyst appears to be the proactive industry invasion by mega-companies that are starting to feel the exposure to healthcare cost risk. I’m referring to the largest titan team-up in history, announced in January, with Amazon, Berkshire Hathaway and JPMorgan Chase. The three promised to form an independent healthcare company that will provide, among other things, cheaper drugs. Amazon’s acquisition of PillPack, a startup that mails prescriptions to people who take multiple medications, has further signaled that competitive pricing and industry-leading speed may be on the way to a historically manual and expensive service.

Up until this year drug store pharmacies had clear competition for each vector, quality of service and price. Launched in 2016, Capsule Pharmacy’s value proposition included consistent inventory, shortened wait times, and better access to medication information. And for years vertical search offerings online, such as WellRx or Q1Medicare.com, offered a quick scan by drug, category, or discount program to find the best price. These are classical positionings in the business world; low price, high volume, and basic service means thin margins but leads to larger market share. Distinctive services can allow companies to justify a higher price and be profitable but with fewer customers. Now, with mega corporate partnerships, traditional drug stores most compete more effectively on both service and price.

 Businesses are typically well positioned to succeed if they are in the bottom left (think Walmart) or the top right (think One Medical). In pharma there appears to be a shift towards the value-for-money segment, the bottom right.
Businesses are typically well positioned to succeed if they are in the bottom left (think Walmart) or the top right (think One Medical). In pharma there appears to be a shift towards the value-for-money segment, the bottom right.

Perhaps this is the shakeup that the Pharmaceutical industry has needed. Operating health services with a profit motive as the primary impetus can only lead to worse health outcomes for patients. With nontraditional industry actors motivated by the health of their employees shaking up the status quo, we can more easily hold traditional industry players to account.

Adventures in re-branding: Hotel execs get wrong what Airbnb gets right

Hotel execs must be reading my blog; I think they loved the re-branding of the solar system so much, that they’ve decided to keep doing what they are doing, but re-brand it as giving a “feeling of home comfort”. Now at hotels like The Standard, the concierge is labeled the “personal concierge”. You can have laundry access, just like a home – but limited to two items per day. Some tasty snacks will be ready in your room – all for the already rolled in $100 surcharge. And at a week or longer, you can get up to 40% off of your rooms (already a common practice among hotels).

These hotels marketing a homey experience are doing nothing different to what they’ve always done; the ingredients to their conception of a “home stay” are not so earth shattering as is their marketing. And this is also where they reveal a fundamental misunderstanding of their unique selling point.

What differentiates hotels from coach surfing and home sitting is the guarantee of comfort – a good night’s sleep in a clean room and a comfy bed, and your own personal space with no house rules to follow. What makes Airbnb competitive is the lower prices and good locations, more so than the home-made experience. So unless a hotel grows legs and moves to a more optimal location or slashes prices, fresh muffins in the morning ain’t gonna win those customers back.