Pill Popping Made Easy
Startup PillPack shows us how drug-dispensing robots and textable pharmacists can provide peace of mind at no extra cost to customers.
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.
Student comments on Pill Popping Made Easy
PillPack is a great example of how digitization of a manual process, such as drug dispensing at a pharmacy, can not only improve consume behavior for individual benefit but also create greater cost savings and efficiencies in the ecosystem around the consumer, i.e. the U.S. healthcare system. As a millennial, I can definitely see myself as a user of PillPack’s online portal and app, but I wonder what the adoption rate is for older demographics. Will this be as scalable in regions of the country or the world that aren’t as digitally engaged? PillPack has done a great job with reducing the friction for user adoption by making it free to the consumer, but it would be interesting to see the company’s strategy to target the most non-compliant patients and thus maximize the positive impact of its digitalized approach to drug dispensation.
Thanks Elyse, for the great post! It seems that PillPack is solving a real problem and as they expand geographically, they could become a real threat to the conventional pharmacy.
I wonder though, what consumers’ response to this system would be. I think that the idea of consuming pre-sorted pills may be difficult for some consumers because they won’t be able to see drug labels. Robotic scanning may minimize the margin of error- but a misplaced pill, incorrect strength or even a wrong combination of drugs at a specific time could have a serious impact on patients. Moreover, how would they deal with lost pills? Does PillPack offer a safety stock? I wonder how willing consumers would be place complete trust in PillPack for the accuracy of the pill sachets. I do however believe that there is huge potential for this technology amongst the elderly- particularly in cases where care-givers or nurses are sorting out a patient’s pills and where human error rates may be higher than machine errors.
Elyse, thanks for sharing this! PillPack definitely offers a great way to deal with prescription ordering and sorting problem. Your blog post offers great insight into how their robot-powered sorting mechanism coupled with their easy-to-use mobile communication systems are benefiting consumers. But I was wondering whether they have more scope in improving the pill consumption process? As you pointed out, taking the wrong pills or not getting pills on time is a big challenge; but even when patients have pills with them, missing out on taking pills at a certain time is also another problem in this context. Can PillPack offer something more than reminders on patients phones? Is there a way to monitor patients’ pill consumption using connected devices? Further, I appreciate that you have critiqued the long-term value proposition of the robotics technology. It seems like it will be very expensive for PillPack to scale if it retains its robotics technology and opens up new distribution centres across the country. Will licensing its technology be a better solution, and will it make more sense to open source their mobile platform and bring on board more pharmacists so that PillPack can scale its impact faster?
Your post offers great food for thought!
Elyse – this is great post! I had no idea about Pillpack and think it will be a technology that our generation and the ones after take advantage of because of its convenience, simplicity, and efficiency. They are certainly harnessing technology to solve problems within the pharma industry of ensuring accurate delivery and dosage for patients and obliging patients to consume the pills at the appropriate time. I also think the service they offer of allowing 24/7 access to pharmacists for questions is very customer friendly and will help address any questions, which I think is something that most people are used to when they go to the pharmacy. My biggest concern with Pillpack’s digitization and its tech features is making sure that older generations understand how to utilize the technology. Changing consumer behavior is very difficult and I am wary of older populations relying on technology to communicate with pharmacists if they have questions since many of them may not be very tech-savvy. This however could be rectified if the program allows for other people to access their accounts to make such inquiries for them (i.e., younger family members or nurses).
PillPack sounds like a great company to watch out for. However, my concerns come from the competitive nature of traditional pharmaceutical companies and how they feel about this new delivery channel. Traditional channels have obviously invested a lot in setting up, getting exclusive contracts and squeezing out efficiencies. Will PillPack be best served to go against these traditional channels or partner with them to gain shared value creation?
From personal experience I can see PillPack bringing about great ease and convenience to patients who consume more than 20, 30 or even 40 pills per day. Currently they have to fill each prescription individually and self organize the pills by day and time. With PillPack, they remove all of that hassle.
Great choice, Elyse! PillPack strikes me as a novel example of how digitization can be done in a way that doesn’t require massive behavior change on the part of the consumer. Because patients are still receiving physical pills without the hassle of carrying bottles or going to the pharmacy, I would imagine the adoption curve isn’t as steep as it would be for company’s attempting to more radically digitize a habitual behavior. To your point about reducing medical distribution errors, I wonder what kind of consumer education PillPack has had to do, and might continue to need in order to gain traction, in order to ensure patients that their pills undergo stringent quality assurance checks given the consumer is no longer regularly interacting with a pharmacist to explain dosages, side effects, etc.
Very cool post, Elyse. I hate making trips to the pharmacy — I’m PillPack’s ideal customer. A lot of commentators have noted that PillPack has its work cut out for it as far as educating customers, bolstering quality assurance, and compensating for the loss of face time that consumers expect with their pharmacists.
But what about protecting against prescription fraud? There’s bound to be some degree of fraud as consumers transfer their prescriptions over the PillPack. What kind of due diligence have they put in place to detect fraudulent prescriptions?
Fascinating company and post! I have not heard about PillPack before, but it is an interesting business model and definitely could change the way consumers fill and consume their prescriptions. I agree with your post (and several of the responses) that the success of the company greatly depends on whether or not Walgreens, CVS, etc. develop similar programs, as well as the accuracy of the fulfillment. I wonder what the doctors and hospital reactions have been to PillPack and if they have any concerns regarding the potential error in fulfillment. It will be interesting to see how larger pharmacies react to new technology companies.
Very interesting article, Elyse! I think PillPack has a unique business model and I see huge potential for this business in more rural United States communities or even internationally in some third world countries. I agree with CM above that prescription fraud and quality assurance are huge risks here. What relationships does PillPack have with doctors currently? What checks are in place to ensure that consumers do not abuse the system?
Great article, Elyse! One of PillPack’s interesting developments this year is its partnership with PokitDok. The partnership is intended to help Medicare patients understand which drugs are covered through their Part D prescription plan, outline how much they cost, and give them clarity on when their insurance will kick in. I think that this partnership gets right at your suggestion that PillPack continue to differentiate itself with individualized service. With regard to international growth, which markets do you think are most ripe for PillPack?
Cool company. Ripe for an HBS Case! There are so many fascinating questions to ponder about this company. The way they have inserted themselves into an existing supply chain has created many opportunities, but also many directions from which to be squeezed out by incumbents. If you had to pick just one area for the company to improve in, what would it be and why?
I love this. I had never heard of PillPack before, but this seems like a massive, disruptive opportunity in the pharmacy space.
In terms of competitiveness, I do worry that PillPack is significantly increasing its costs by taking on the cost of carrying inventory from wholesalers. For example, does PillPack carry specialty pills that help patients with rare diseases or ailments? PillPack seems like a fantastic business model for common drugs for issues like hypertension or asthma, but I worry that PillPack will either not have the specialty pills that a CVS / Express Scripts carries, or that it will be a long delay because they need to order the specialty pill from the wholesaler. If the entire value proposition is that PillPack puts all of the drugs you need in a daily pouch, then they need to be able to fill all orders, even rare prescriptions. This would be my main question for the company.
Interesting article–really makes you think about how dynamic the early stages of a new industry can be. Several companies right now are developing robotic pharmacy dispensing systems that essentially serve as robotic vending machines for pharmacies. I had thought this was a really innovative concept and would likely take over the pharmacy industry until reading about PillPack–the delivery component is so much more convenient that it will probably win out as a model over robotic dispensers, which I imagine most of those companies haven’t even considered.
Rudi Gassner brings up an interesting point about the target market, though. The users that will benefit most from this service are the elderly, but this is also the segment least likely to use technology solutions like Pillpack. I wonder how they will be able to overcome this target market discrepancy via marketing.
Great article Elyse! I had once used a similar service for my grandmother- putting pills in different slots with days mentioned on each slot. Unfortunately, it didn’t work at all because this system assumes that the patient will remember that they have to take tablets and will then be unable to figure out which ones to take and how many. She still needed a person to remind her and give her the adequate dose. I think this idea has tremendous potential, I only wonder how this could be extended to serve older patients who probably need pre-sorted pills the most! I am also not sure about patenting the ‘filling prescription’ part of the business, as we discussed in marketing it feels a bit ‘icky’ to patent something so critical to better healthcare in the future. I completely agree with one of the posts above that this system requires the users to place a huge amount of trust in the system, and it requires a major shift in mentality- I check the name on my pills at least 3 times before I take them! I would also be worried about potential psychological impact- for instance, I can see a case, where a patient thinks he is reacting poorly to a pill and blames PillPack for it. Worse would be if a patient actually reacts poorly to a pill and blames PillPack for it.
Great post Elyse! You mention CVS and Walgreens needing to invest more in technology like this. Do you think pillpack has enough of a first mover advantage to combat eventual competition from traditional pharmacies?
Sign me up for PillPack! I think this is a great concept that replaces an outdated and error prone system. Looking at my own situation at the moment, I am on the verge of running out of my usual daily medicine, as I have continued to put off getting to the doctor and updating my prescription since my move to Boston. A service like PillPack would be a great way to use technology to mitigate the inconvenient processes / logistics that often go along with a move. I wonder about PillPack’s ability to penetrate older generations / elderly patients, who arguable would benefit from a service like this the most. I would recommend PillPack consider incorporating B2B relationships into its offerings, so that it could service hospitals and nursing homes, instead of having to rely on the individual patient to adapt.
Good points! Elderly patients aren’t as likely to have a smartphone (or even hear about the startup to begin with), so I agree there are some barriers to adoption with that target market. Luckily, PillPack allows caretakers or family members sign up on behalf of a patient to get him or her started. I would argue that it is still a better solution than the patient having to sort through multiple pill bottles themselves and remember the right quantities needed for each type of pill. I really like your idea of partnering with hospitals and nursing homes as that would help PillPack gain market share faster and garner the support of experts in an industry where word-of-mouth matters. With licensed professionals administering the pill taking, PillPack would also benefit from a higher compliance rate (patients actually taking the pills at the right times) and therefore more satisfied customers.
Such a great idea. With mobile apps and expectations of service we have as a generation, it seems obvious that this is the next step in the pharmacy business. I think your suggestion to patent its delivery service is spot on. This is something that CVS could easily replicate and at much higher scale. PillPack needs to establish a way to prevent competitor entry or hope for an acquisition.