Stanley Warren, through his PharmaTech startup RX Help, is building apps for independent pharmacies to operate profitably. So far, the reaction from independents is- build and we will come. The bigger problem this shifts is the high cost and low quality of healthcare provided by the current pharmacy ecosystem.
I talked to Stan about giving lower cost, better quality healthcare a chance through the apps he's building. Initially for independent pharmacies, and eventually to connect practitioners, pharmacies and patients.
Click here for audio and audio transcript.
1. Why healthcare is so expensive, the struggle for independent pharmacies, and what Stan is doing about it.
Welcome to How Founders Build. My name is Sharon Landis and I’m your host.
Sharon Landis [00:00:05:32]: I’m very excited today to be talking to Stan Warren. He is, get ready for this, the Chief Shark Wrestler a Requiem Fishing, and also the president of RX Help. Welcome to How Founders Build.
Stan Warren: Thank you for having me Sharon.
Sharon Landis: Can you give a quick intro about yourself and your company?
Stan Warren: I’m Stan. I’m in the process of relocating to Miami to focus on my pharmacy startup, RX Help. It’ll be a set of tools for independent pharmacies to maximize profits. And also focus on my non-profit. It's based on shark conservation, education and research with the hopes of making better public policies for conservation efforts.
1. What needs to be disrupted in pharmacy?
Sharon Landis [00:09:41:52]: What are you trying to disrupt in the pharmacy industry?
Stan Warren: I want to create a platform that works outside the current healthcare ecosystem. I believe that PBMs, or Pharmacy Benefit Managers, are the number one cause of high cost in healthcare. The more they consolidate and vertically integrate, the more it’s going to cause long-term negative effects on healthcare cost. Without major changes in the law, the only way to combat it, is to create something that doesn’t need them.
Sharon Landis: How would you describe the current healthcare ecosystem that’s problematic for pharmacies?
Stan Warren: CVS (CVS Health), Express Scripts and Optum (OptumRx) combined with all the companies they own. They own 84% market share. From my point of view working on the independent side, after working for CVS for 15 years, there’s not a fair chance for competition to come in.
Sharon Landis: Why is that?
Stan Warren: Because of vertical integration. CVS owns the wholesaler, who sells pharmacies the drugs. They own the retail stores. They own mail order. They own specialty pharmacy. They own home healthcare. They own the trucking company that delivers for all of these companies. They own the PSAO, the Pharmacy Services Administration Organization, who does a lot of contracting and services for independent pharmacies. They own buying groups. They own all these entities that don’t need to exist to get drugs from the manufacturer to the pharmacy. They set the price of the drug to everybody who buys them. They set how much the pharmacies get reimbursed by the insurance companies. And they own the insurance companies, so they get to profit the entire way.
Sharon Landis: What percentage of pharmacies are independent in the US? Is it small?
Stan Warren: No, there’s actually 26,000 across the US. The number changes a few thousand every year. It’s roughly 50-50 or 55-45, as far as independents to chains. CVS and Walgreens both have about 9,000 stores each. Variety has about 4,000 or 5,000.
Sharon Landis: There are a fair number of independents.
Stan Warren: Yes, there’s quite a few, but it’s not a fair playing field. I read a report on Guanfacine, or extended release Guanfacine. CVS reimburses their pharmacies $11 per pill, and reimburses independent pharmacies 0.11 per pill. That’s a big no-no. They get away with that. I just read an article that said preferred network pharmacies will save us $1.4B. But that’s just funneling all our healthcare into these 3 companies. It’s very problematic in my opinion.
2. Procurement apps for independent pharmacies
Sharon Landis [00:12:41:58]: What ideas do you have for pharmacies outside of “the domain?”
Stan Warren: The first apps that I’m building are for procurement for independent pharmacies. Like an Amazon for wholesale pharmaceutical drugs, specifically for independent pharmacies. There are a few of these that already exist, but they’re missing key features. There haven’t been many tech companies interested in pharmacy until the pandemic. A lot of what is done, isn’t to the fullest extent, is the best way to put it.
Sharon Landis What was it about the pandemic that increased interest?
Stan Warren: Since the pandemic there’s been a focus on healthcare, quality of life, and mental health. There’s been a focus on what can be done better in healthcare all around. With the vaccine being available, it’s starting to show that distribution is a problem with a lot of drugs. I knew that distribution for the COVID-19 vaccine was going to be extremely difficult. Even the shingles vaccine that came out a year ago, it’s been a disaster for people who need it. The whole system has so many areas of opportunity, which is why I’m so happy to focus on being a part of changing that.
3. Independent pharmacy apps will fight negative reimbursement and healthcare disconnect
Sharon Landis [00:13:57:61]: What will your apps do to make things run more smoothly?
Stan Warren: It’s about fighting negative reimbursements, which is the biggest issue for independent pharmacies. They’re getting reimbursed .11 a pill, their competitor gets reimbursed $14 a pill. The competitor also sells the drug. If they sell you the bottle at a loss they can eventually squeeze you out, which they do. Maybe the .11 is profit for a while, but they’ll find a way to sell it to you for more than you can make on it. Independent pharmacies eat losses all day long. It’s more like gambling on insurance, every time they submit a claim, whether they’re going to make money or not.
Sharon Landis: Have you started talking to pharmacies to see if there’s interest? What sort of reaction are you getting?
Stan Warren: So far the reaction is, if I build it they will come.
Sharon Landis: Are you going to be involved with distribution?
Stan Warren: Eventually I would hope so. My end goal is to start a digital pharmacy, or an alternative to what we have now. To find a way to do this without CVS, Express Scripts and Optum, we have to find a way to make it affordable enough to do it without them. I don’t know if that’s totally possible. Brand name medications are so expensive. There’s a growing market in specialty pharmacy. Most of those drugs start at $2,000 a month, in retail cost. I don’t see getting rid of insurance, but the way that we’re doing it now, we’re set up for major failure, or we’re going to end up getting all our care through those three companies and have no other choices because we’ve allowed them to have to much power.
Sharon Landis: What will the first version of your app offer?
Stan Warren: It’s purely procurement. That’s a stepping stone for other projects. The largest goal that I can see tackling is to build an EHR or EMR that has the pharmacy and the practitioner connected. For how closely related both the pharmacist and prescriber are in someone’s healthcare, they are so disconnected in conversation, in the treatment process. One system doesn’t speak to the other. There is a lot of overlap. There’s room for error. All kinds of issues are created because the system isn’t the same on both sides.
Sharon Landis: Your idea is to bring the doctor and pharmacist together?
Stan Warren: Yes. Through one system where both stakeholders can see every part of the process. That will allow many features for communication to patients to be integrated. To have a more complete conversation on a patient's health and how therapy is going. Versus the scheme that we have now where patients cut pills in half to save money. They don’t tell the doctor or the pharmacist. There’s a lot of opportunity for the patient, because of cost, to avoid therapy or do therapy differently than what’s prescribed. That makes it very difficult for the doctor or the pharmacist to make recommendations.
Sharon Landis: I remember a prescription I had. I couldn’t get my doctor on the phone. The prescription didn’t quite agree with me. I managed to someone at the pharmacy. When I talked to my doctor, she agreed with what the pharmacist said. But I can see how things could fall apart. It’s my job as the patient to figure out who to talk to and put the whole thing together. And doctors, I don’t know what it’s like in the States, but in Canada it’s almost impossible to get doctors on the phone. You have to go see them.
Stan Warren: You can’t get them on the phone in the States either. When patients order refills, they ask often pharmacists to call the doctor. They're surprised that we don’t get to speak to the doctor. No, even we don’t get to speak to the doctor most of the time. Sometimes you get a doctor on the phone. Some practices are great. There are others… Good luck. Over the years, we wondered if the doctor even existed. That’s how bad it is.
Sharon Landis: That’s funny.
4. Pharmacy homecare?
Sharon Landis [00:18:13:49]: You may be too young for this, but back in the old days, doctors made home visits. Do you see interest in the pharmacy community for there to be pharmacist home visits?
Stan Warren: There could be. I think it would be best if it was a doctor-pharmacist combination. There are more stakeholders than the doctor and pharmacist who could help, and they really should all be involved. A nutritionist or dietitian. Probably some sort of personal finance, maybe not we think of as financial advisors. And then you should have a therapist. We should have a therapist starting at age ten. We’ve neglected mental health as a society. So, having a therapist, a nutritionist, financial advisor, then your pharmacist and your doctor, having those professionals would greatly improve your life.
Sharon Landis: It will be interesting to see how your apps develop. Thanks for sharing your journey.
Stan Warren: Thanks so much for having me.