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Mike Cote's Business Editor's Notebook: PillPack went from startup to $1b sale in 5 years

By MIKE COTE
July 01. 2018 12:20PM
CEO TJ Parker listens to a question while meeting with the New Hampshire Sunday News at PillPack in Manchester in October. (DAVID LANE/UNION LEADER FILE PHOTO)



"PillPack aims to disrupt the retail pharmacy business in much the same way Amazon did to bookstores and just about everything else."

That's a line from a column I wrote 2 1/2 years ago, when the Somerville, Mass.-based startup had about 200 workers, most based at its flagship mail-order pharmacy in the Waumbec Mill building in Manchester. Now the company employs 1,000 workers in several locations - including about 500 here - and soon will be another jewel controlled by Jeff Bezos.

Comparing PillPack to Amazon was hardly a big leap to make even in 2016. The company already was using robot pill dispensers and proprietary software to prepare medication packages for customers and was quickly outgrowing its Manchester space.

Likewise, it was not a huge surprise to learn that Amazon is now buying PillPack, especially a few months after CNBC reported that Walmart was considering acquiring the company as retailers battle for a bigger share of the pharmaceutical market. Presription drug spending in the U.S. could hit as much as $610 billion by 2021, according to a 2017 industry report.

Amazon is paying $1 billion for PillPack, according to The New York Times, and there will be a big payday for the venture capital firms that invested $118 million in the company since 2013. Its two founders both have a 10 percent stake in the company and will make $100 million each, Bloomberg reported Friday, citing a confidential source.

PillPack was dreamed up by T.J. Parker, a pharmacist, and Elliot Cohen, an engineer, who met through MIT's Hacking Medicine program, a weekend forum for solving health-care programs at the Sloan School of Management. Their premise was straightforward: make taking medication less complicated, especially for people who have five or more prescriptions.

Customers receive their medication in packages sorted by the days of the week, with details on the best time of day to take each one - a product especially attuned to an aging population and people with chronic conditions. While Pillpack has been reaching out to a younger demographic, the median age of its customers is in the mid-50s. The company ships to every state except Hawaii.

"What we're really trying to do is just build a better system. And we think the best way to do that is by building tools that support the activity of the pharmacists," Cohen said during a visit to PillPack in 2016. The company was not commenting on the Amazon deal last week.

Sierra Bragdon stocks medicine at PillPack in Manchester in 2016. (DAVID LANE/UNION LEADER FILE PHOTO)

PillPack's rise from startup to acquisition target took five years. It expanded from 1,600 square feet in the Millyard to 55,000 in 2016 and later nearly doubled that space, which included taking over almost the entire first floor of the Waumbec Mill. 

Parker, the son of a Concord pharmacist and the company's CEO, quickly became a national figure, especially after PillPack waged a public battle with Express Scripts, a prescription manager that also offers home delivery. In 2016, Express Scripts - which at the time managed prescriptions for 85 million people - threatened to sever ties with PillPack and thus take away 30 percent of the startup's customer base. The companies ultimately reached agreement.

"The core issue is they do not want competition," Parker told the Union Leader at the time.

Last year, Forbes included PillPack on its list of the "Next Billion-Dollar Startups." Forbes and TrueBridge Capital Partners asked 195 venture firms which companies they thought were most likely to reach a valuation of $1 billion or more. They selected 25 companies.

Looks like PillPack made good on that one.

'Prime' time for scripts

Amazon's takeover of Whole Foods Market a year ago rattled the grocery industry, which has been waiting to see how the company takes advantage of the chain's 470 stores in the United States, Canada and the United Kingdom. Members of Amazon's Prime program, who pay $119 a year for such services as two-day shipping, digital book rentals and video streaming, enjoy regular discounts at Whole Foods, which has stores in Nashua and Bedford. 

Last week, Whole Foods announced another round of pricing reductions for Prime members, including 25 percent off bulk items such as nuts and granola, and deep discounts on high-end fish, meat and organic produce. Whole Foods also is extending the price cuts to customers who choose the free two-hour delivery its offers in Boston and other urban markets.

Amazon has yet to reveal how Prime members will benefit from its takeover of PillPack, but you can bet more perks are on the way. The forecast calls for disruption.

Contact Business Editor Mike Cote at 206-7724 or mcote@unionleader.com.


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