The trend: Telehealth boom during pandemic brought some benefits of e-commerce into health care. Some companies are now looking to use ecommerce tools to improve the efficiency and transparency of their health care supply chains.
FreightWaves' vice president for global health care strategy at UPS Dan Gagnon said that there are companies like Apple, Samsung, and Google that are winning aggressively in the field of health care. It's because they make health care simple. This is what is changing the environment for health care.
Not only are tech and retail companies testing e-commerce tools, but more established players in the health care industry are also looking into how they can improve their operations.
The supply chain for health care is more complicated and tightly controlled than other industries. This could make it difficult to integrate these tools.
Background: In the last few years, a number of tech and retail companies that have strong e-commerce operations made inroads into the healthcare industry.
Amazon, the e-commerce giant, acquired Pill Pack online pharmacy in 2018. It also launched its own pharmacy brand last summer. According to Business Insider, it now offers COVID-19 testing. It is also exploring other diagnostic testing services. As a health benefit, large employers may offer telemedicine services.
Google's smartwatch maker FitBit announced recently a partnership with LifeScan, allowing diabetes patients to track their glucose levels and measure physical activity.
Walmart and Novo Nordisk are collaborating to create its own brand analog insulin.
The promise: Gagnon stated that these moves are making it more difficult for the supply chain of health care to be more convenient.
He said that although they may not be health-care companies, they are able to quickly bring new products and services on the market. They are able to quickly identify the needs of customers and provide convenience through digital technology.
He claimed that the traditional model of health care purchasing, which is based on complex relationships between group purchasing organizations (GPOs), distributors of medical supplies, insurers, and providers of health care, has too many steps.
Gagnon claims that each step increases cost and makes it difficult to compare prices for similar products. Gagnon hopes that e-commerce tools can make the supply chain for health care more direct and reduce some of the friction.
He stated that E-commerce would have an impact on the economy. The question is, "How long will it take for it to be as seamless and seamless as Amazon?"
Case study: Cardinal Health launched an innovative service in July that allows independent pharmacies set up an online storefront to sell over-the-counter medicines.
The pharmacy's brand will be used on the storefront, which will integrate with the website of the independent pharmacy. Customers can order more products than 11,000 from Cardinal warehouses, instead of displaying the pharmacy's inventory.
Cardinal is already supplying these independent pharmacies with drugs to stock their shelves. Cardinal automatically adds the product to the pharmacy's daily, regular shipment when a customer orders. The pharmacy then delivers the product or asks customers to pick it up.
FreightWaves: Kristin Ewig, Cardinal Health Product Manager, stated that managing a website, inventory, and payment integrations requires a lot of work on the part of the pharmacy owner.
About 70 pharmacies have already signed up for the $129/month service.
Ewig stated that ecommerce storefronts enable independent pharmacies to profit from the rise in ecommerce sales across all industries.
Customers' expectations have changed due to the 40% increase in total ecommerce sales over the previous quarter. Customers expect products to be delivered quickly and seamlessly.
Cardinal will only offer e-commerce sites to independent pharmacies that are able to deliver products to patients within 24 hours of receiving an order. Ewig stated that the company and pharmacies must show they are competitive with ecommerce experts.
She said, "We know that customers expect that." "I think that's huge because once Amazon came into being -- two-day shipping, next-day delivery -- that was kinda the expectation."
Next, customers will be informed that they can order drugs online from an independent pharmacy near them. This was likely not possible before the pandemic.
Cardinal uses search engine optimization (SEO), to make sure that the websites appear more often in search results.
Ewig stated that if someone searches for "pharmacy near me", the independent pharmacies will have a greater chance of appearing on search results. Local SEO will help drive traffic. Once we have traffic, we'll see more orders.
Case study: The biosciences division at medical device manufacturer Becton, Dickinson and Co. (BD), launched a new e-commerce website last month, which sells equipment that studies cell behavior.
Todd Garland, BD's general manager for biosciences, stated that the new website should feel more like shopping on Amazon. It makes it easier to purchase a product. However, it also includes more information for customers who wish to do research online.
"When I want to purchase something on Amazon, one thing I do first is look at the reviews. FreightWaves' Garland explained that he looks at ratings.
Garland stated that earlier iterations were simply unadorned lists with parts numbers that were difficult to find. Customers can search for products using the information on the new website.
Garland stated that e-commerce's recent growth has taught customers to expect quick delivery and no-nonsense returns. However, there are also upsides. Customers have faith that ecommerce transactions will work.
Garland stated that customers are now willing to transact for instruments as high as $100,000 because of the trust that companies like Walmart and Amazon have built around the ecommerce platform.
BD's Biosciences Division is the leader in e-commerce. It's partly because its customers include academic and biopharma research laboratories that have a simpler purchasing process than healthcare providers.
Garland stated that BD can still use the ecommerce architecture of the biosciences division for gradual expansion into new products.
The problem: Eugene Schneller from Arizona State University is a supply chain researcher. He said that there are certain areas in the health care supply chains that are more e-commerce-friendly than others.
He anticipates e-commerce to play a major role in the pharmaceutical and durable medical equipment markets, as well as in sales of medical equipment that patients can take home after a procedure. These markets are very similar to other industries' retail sales. Selling large volumes of medical products in high volume to large hospital systems is likely to be a more difficult task.
FreightWaves: "I believe the largest market for Amazon is... the health care market." Their sweet spot is the retail market.
Although the purchasing process for large hospitals systems is more complicated and less flexible than direct to customer retail sales, it has its advantages.
Matt Burns, the director of ecommerce at the GPO Premier, said that the traditional model is able to take advantage of economies of scale because it combines demand from many health care providers. He believes e-commerce tools can be used to complement existing systems and improve them.
He said, "A model won't stay around for 40-50 years without proving its viability." But there are many inefficiencies. Transparency is a problem. Convenience is a problem. ... All these things lend themselves to electronic commerce.
Burns stated that e-commerce tools will be most beneficial to smaller providers who don't have large contracts with GPOs or medical distributors.
"If you are not affiliated with a large healthcare entity, you will lack the resources they have. FreightWaves says you lack supply chain knowledge and staff. They also don't have the ability to combine volume. You need e-commerce platforms to get the same products at comparable prices.
What's next? Burns suggests that health care companies should be focusing on connecting digital processes to patient care as they experiment with ecommerce.
This could be done by automating orders for items patients may need at home prior to or after surgery and then sending that information to a health provider.
The key factor for e-commerce success in the health sector is not getting patients a product quicker. Burns stated that it will be about integrating digital tools and health care expertise.
He said that there are major e-commerce firms that have mastered these tactics. "It's going to take an organization that is ingrained with a health care provider that will crack this for health care."