August 20th, 2012 by David E. Williams of the Health business blog
The Health Business Blog is taking a break this week, and re-running some posts from August 2008. If you’d like to comment, please do so on the original post.
The distribution of prescription pharmaceuticals is beginning to take on some of the characteristics of online videos and music. Traditionally, access to prescriptions works as follows:
- Patient has a problem
- Patients sees his/her physician
- Physician diagnoses problem and writes prescription
- Patient takes prescription to traditional pharmacy or PBM-owned mail order company
- Pharmacy fills prescription with a drug manufactured by an FDA-regulated brand name or generic pharmaceutical company
- Patient takes medication
- If patient needs more medication after initial prescription and refills are exhausted, patient requests renewal from physician and repeats steps 4 to 7
But steps 2 through 7 are breaking down. Instead of seeing their physicians, increasing numbers of patients are either going directly online to order from pharmacies or are borrowing pills from friends and family who’ve received prescriptions. According to MedPage Today (Adults Commonly Share Prescription Drugs with Friends and Family) almost 30 percent of adults reported sharing prescription medications with others. Younger people are the most likely to share.
Meanwhile, shady web-based pharmacies that don’t require prescriptions and often sell counterfeit drugs are becoming increasingly sophisticated and impressive. MarketMonitor estimates that about 1000 shady pharmacy sites generate an average of 100,000 hits per day each and that such pharmacies spend about $25 million per year on search advertising. An acquaintance who works in the pharmaceutical security business told me that these pharmacies aren’t what they used to be. In fact they are adopting marketing and customer service best practices that are used by legitimate vendors. Rather than going for a quick score, the web-based companies are looking for repeat business and word-of-mouth referrals by providing products that work, offering easy-to-navigate websites and low prices.
This isn’t quite the same as what’s happened in the field of digital music and video, but there are similarities:
- The intellectual property violators (e.g., Napster, YouTube, shady pharmacies) have made it easier and more convenient for consumers to get what they want –either for free or cheaply
- Traditional players have had a hard time reacting (e.g., the big music companies, the big pharma companies). In music this has led to a major loss in sales and it’s also meant that the record labels have been willing to sell online. The emergence of DRM-free music downloads is due to the existence of free –though illegitimate– alternatives. It’s also allowed iTunes to gain leverage over the record companies
There are some important differences, though:
- Unlike digitial music files, counterfeit pharmaceuticals aren’t exact copies of the originals –and it’s much harder to tell the difference
- The existence of insurance and general acceptance of the doctor’s role in prescribing means there’s less demand for free, presciptionless drugs
- Pharmaceuticals are physical products, so it is possible to secure the supply chain
Still I wonder whether some of the shady websites will end up going legit (like Napster) and whether pharma companies will be forced to react (e.g., by pushing for OTC clearance of lifestyle drugs that are still on-patent or by bundling services in with their products).