In a historic mill in New Hampshire, a giant hospital-grade robot scans prescriptions, sorts through hundreds of pills and spits out customized PillPacks to deliver right to your door. With technology like this, who would bother making the trip to the pharmacy?
Video: How PillPack Works 
A Digital Pharmacy at Your Fingertips
Over 30M Americans take five or more prescription drugs a day, and half don’t even take their medication as instructed, often missing doses . PillPack’s business model effectively addresses this issue and many others that those who take medication face.
Notably, PillPack redesigned the way customers take medicine by eliminating the need to carry multiple pill bottles and introducing single-use multi-drug packets. Each packet is labeled with the day and time it should be taken and contains the specific pills that the customer needs. This convention helps those that are chronically ill manage their health conditions — researchers found that by placing pills in blister packs, the percentage of patients who took their medicine increased from 61 to 97% .
PillPack further differentiates itself through its online portal and app, expert customer service, and low pricing — all made possible by its digital infrastructure. In five minutes, customers can sign up online, providing basic pharmacy and insurance information that allows PillPack to transfer prescriptions. Patients then automatically receive pre-sorted packets biweekly, ensuring that they do not run out or have to request refills.
Leveraging digital capabilities, PillPack provides attentive service that typical pharmacies do not have the bandwidth to provide. PillPack recruits licensed pharmacists to provide immediate support 24/7. For example, if a customer wants to tweak the timing of doses or update a prescription, she can message the pharmacist through the mobile app.
Remarkably, PillPack provides all of these services free to its customers, who are responsible for only a typical co-pay. PillPack generates its revenue through health plan reimbursements, receiving margins of nearly 20%, contributing to ~$15M in revenue last year .
PillPack’s Mobile App 
Behind PillPack’s Operations
Sophisticated technology is the backbone of PillPack’s work processes. Beyond sorting and distributing, PillPack uses robots for a level of quality assurance that pharmacies are unable to match with human-dependent processes. Robots scan packaged pills for size, shape and density to ensure that every packet contains the accurate pills for each dose. This extra step is crucial in giving customers peace of mind — after all, ~1.3M Americans are injured by medication distribution errors annually .
Another core component of PillPack’s operating model is its digital communication system. At all hours, customers can speak directly with a licensed pharmacist through the mobile app or webchat. Customers can even track in-app whether they are consistently taking their doses and can opt-in to receive phone alerts to take pills.
Through its centralized online ordering model, PillPack better monitors and analyzes customer demand to determine which medications to purchase from wholesalers . As a result, PillPack adjusts its procurement in a timely manner to keep its inventory holding costs low. At any given time, PillPack’s robots are stocked with 400 high-volume medications it has identified through customer data . This information system enables PillPack to better serve repeat customers who never have to face out-of-stock issues, and ultimately allows PillPack to maintain low pricing.
The Future of PillPack
Through technology, PillPack has made obtaining medication hassle-free, but the startup needs to evolve to offer a customer experience that leading pharmacies cannot replicate:
- PillPack does not offer same-day delivery, but in our digital world, we expect products instantaneously. Instead of centralizing operations at its NH location, PillPack should build several distribution centers throughout the US to speedily serve nearby cities.
- Superior customer service or mobile offerings can be imitable. PillPack should patent its innovative approach to filling prescriptions to prevent retailers from copying its technology.
- PillPack should pursue agreements with suppliers and insurance companies outside the US to penetrate international markets and benefit from first mover advantage.
- In order to beat large pharmacies that lack individualized service, PillPack can reposition itself as a customer-centric health management company. It should invest in hiring engineering talent to build out its technological infrastructure and provide value-added services such as an online community where customers with similar conditions can connect for support and advice.
- Ultimately, PillPack’s sustainable competitive advantage may be its robotic dispensing technology and packaging, so it is worth exploring whether licensing that technology to pharmacies would be a more profitable business model.
Undoubtedly, the CVS and Walgreens of the world need to invest more in technology and aggressively pursue new strategies to compete. With digital capabilities to envy, PillPack is our pharmacy of the future.
[Header Image] Flaherty, J. (2014, February 14). A Drug-Dealing Robot That Upends the Pharmacy Model. Retrieved November 18, 2016, from WIRED, https://www.wired.com/2014/02/pillpack-uses-design-thinking-become-pharmacy-future/
 Kokalitcheva, K. (2014, October 09). With a Fresh $8.75M, Pillpack’s Online Pharmacy Now Delivers to 40 States. Retrieved November 18, 2016, from VentureBeat, http://venturebeat.com/2014/10/09/with-a-fresh-8-75m-pillpacks-online-pharmacy-now-delivers-to-40-states/
 Lee, J., Grace, K., & Taylor, A. (2006, December 06). Effect of a Pharmacy Care Program on Medication Adherence and Persistence, Blood Pressure, and Low-Density Lipoprotein Cholesterol. Retrieved November 18, 2016, from The JAMA Network, http://jamanetwork.com/journals/jama/fullarticle/204402
 Hedgecock, S. (2015, April 15). Pharmacy Startup PillPack Could Change the Way America Takes its Medicine. Retrieved November 18, 2016, from Forbes, http://www.forbes.com/sites/sarahhedgecock/2015/04/15/this-pharmacy-startup-wants-to-change-the-way-you-take-your-medicine/#381cc59618b3
 Osterberg, L., & Blaschke, T. (2005, August 04). Adherence to Medication. Retrieved November 18, 2016, from The New England Journal of Medicine, http://www.nejm.org/doi/full/10.1056/NEJMra050100
 MRC. (2015, June 04). PillPack Start-Up Challenges Drugstore Giants. Retrieved November 18, 2016, from Medical Research Consultants, https://www.mrchouston.com/pillpack-start-up-challenges-drugstore-giants/
 Apple. (2016, November 01). PillPack – Pharmacy Simplified. Retrieved November 18, 2016, from Apple, PillPack – Pharmacy Simplified. (2016, November 01). Retrieved November 18, 2016, from Apple, https://itunes.apple.com/us/app/pillpack-pharmacy-simplified/id955593437?mt=8
 RBR. (2014, February 16). $4M for PillPack as Robots Reinvent Retail Pharmacy. Retrieved November 18, 2016, from Robotics Business Review, https://www.roboticsbusinessreview.com/4m_for_pillpack_as_robots_reinvent_retail_pharmacy/
 FDA. (2016, October 20). Medication Error Reports. Retrieved November 18, 2016, from FDA U.S. Food and Drug Administration, http://www.fda.gov/Drugs/DrugSafety/MedicationErrors/ucm080629.htm
 PillPack (2013, December 5). Introducing PillPack. Retrieved from https://www.youtube.com/watch?v=PtBNhNG59GU.