Editor's Note: The following article was originally published in National Association of Corporate Directors. Since publication of this piece, Amazon acquired the online pharmacy PillPack for a reported $1 billion.
It seems there’s always a new article about Amazon’s latest Alexa news, or a trendy startup trying to disrupt the shopping experience. Or, more soberly, a downtown now dominated by empty storefronts. Americans living and shopping in the country that invented the modern shopping mall, the supermarket, and e-commerce seek out the latest and greatest retail experience. Traditional retailers are now getting into the health business. Amazon bought Whole Foods, a grocer that began as a health food store. Walmart is considering buying PillPack, an online pharmacy startup. Albertsons is buying Rite Aid. And, in the biggest retail healthcare deal yet, CVS is buying Aetna, bringing together a retail chain with nearly 10,000 stores and a major national health insurer.
What does all this activity mean? Will the average American soon be going to the drugstore to pick up a quart of milk and have someone look at their rash while they’re there? Will my family physician deliver care at the same place that sells my Cheerios? The short answer to both questions: Maybe.
Retail’s entry into healthcare reflects three major trends in how the healthcare industry—and consumer behaviors—are evolving:
1. Consumers are in the driver’s seat.
In 2017, the average single plan deductible for those with employer-sponsored health insurance was $1,505. Since 2006, the average consumer’s annual out-of-pocket healthcare spending has increased by 230 percent. Consumers are spending mostly their own money for basic healthcare services, and they want to see value for that money like they do in other industries. They want reasonable prices, convenient hours and locations, and great service—not exactly attributes for which traditional doctor’s offices or hospitals are known. So, they’re turning to retailers and others to meet their needs, and it’s working. Oliver Wyman research shows consumers who visit a clinic in a drug, grocery, or discount store are highly likely to return—with just the opposite being true for conventional medical offices.
2. Primary care is being redefined.
The shortage of primary care physicians nationwide has been well-documented. Yet primary care is provided in many locations beyond the traditional exam room. Providers such as Kaiser Permanente now conduct more than 50 percent of primary care visits electronically. And in the United Kingdom, through a partnership with the artificial intelligence company, Ada, the National Health Service provides round-the-clock care via a chatbot. Also, in states such as California, pharmacists are beginning to be licensed to provide basic medical services, which could have a significant impact, given that there are more pharmacists in the US than there are primary care physicians. A drugstore chain with a pharmacist on every corner, or an online retailer with an app on every smartphone, is well positioned to get into the modern primary care business.
3. Pharmacy matters more than ever before.
We’ve seen some miraculous drug innovations in recent years—from a cure for Hepatitis C to using a patient’s own immune system to fight cancer—but those innovations have been accompanied by significant increases in pharmacy costs. According to Mercer, increases in pharmacy spending are one of the biggest concerns for employers when it comes to managing healthcare costs. Yet controlling that spending requires careful coordination long after a physician writes a prescription, from ensuring drugs are being taken correctly to understanding which consumers represent most of the spending to monitoring effectiveness. (Overall, just 0.3 percent of Americans account for a full 20 percent of drug spending.) And retailers—with big local footprints, large pharmacist workforces, and years of experience with consumer analytics—are in an advantageous place to deliver real value.
What does this mean for corporate directors?
Well, for those on retailer and healthcare boards, what’s vital is making sure that experience, value, and consumer preferences remain front and center on the company’s agenda, and that a range of innovative partnership and M&A options are being considered.
In other industries, directors should be asking hard questions to probe how these retail healthcare trends are being reflected in employee benefits and the company’s role in the new retail healthcare ecosystem. Health is affected by nearly every part of a consumer’s life, from technology to transportation, to food, to housing choices. Pretty soon, every company could be a healthcare company.