Blake has worked as a Market Analyst at Interact Analysis since 2017. Covering the markets for low voltage AC motor drives, predictive maintenance, and mobile hydraulics, Blake has developed expertise in automation systems, industrial digitalization, and off highway-electrification.
We are happy to announce a new area of coverage for Interact Analysis: The Market for Pharmacy Automation Equipment. Research into this market is already well underway and we plan to make our analysis available for purchase in late March. For now, we wanted to take the time to highlight some key trends illuminated in our first round of interviews with market stakeholders.
What Do We Mean by ‘Pharmacy Automation Equipment’
The scope of our research is focused on the machines used to store, pick, and dispense medication in unit dose, blister pack, or individual tablet form. Additionally, we are looking into technology which enables the automatic storage and retrieval of medicine for applications like automated will–call or more general back of house operations within pharmacies. These technologies could be present in operations more up–stream from the patient like in a central fill facility, or they could be in retail/hospital pharmacy environments. Our goal is to size and forecast sales of these machines and their accompanying service, provide analysis of the competitive environment as well as trends identified in our interviews with suppliers.
An Increasing Presence of Warehouse Automation Providers Entering the Supplier Base
The genesis of this project came out of research we had conducted in the warehouse automation space. Many vendors involved in warehouse automation have realized that the core competencies needed to be successful in warehouse automation, are equally valuable within the pharmacy automation landscape. As a result we have observed many automation vendors, who would typically play in higher throughput warehousing applications, re-purposing or even scaling down their offerings to suit similar applications within the pharmaceutical supply chain.
Knapp, a provider of automation solutions in warehousing, has begun re-purposing its solution for healthcare. While Knapp technology will be most often found in high-throughput pharmaceutical distribution applications, the company purchased Apostore in 2018 indicating a desire to move into more retail centric environments. SSI Schaefer, another supplier of warehouse automation technology, has recently extended its partnership with one of the largest suppliers of automated pharmaceutical storage and retrieval systems, BD Rowa. In our opinion, this agreement is indicative of both companies’ desire to develop offerings in areas where they are currently lacking. Similar to Knapp, SSI Schaefer is strong in high-volume applications whereas BD Rowa has been effective at selling to comparatively medium and slow-speed applications in central fill, retail, and long-term care facilities. The partnership positions both companies to benefit from the competencies of the other.
Increasing Talk of ‘as a Service’ Models Replacing Traditional CapEx Sales
Switching from a model based on capital expenditure sales to something centered around providing a service is nothing new, particularly in markets where the cost of acquiring a technology is prohibitively high from a user perspective. While these models are present in a wide array of automation markets, often they have trouble catching stride. Most commonly, the reason for this stems from the difficulty associated with tracing product throughput; the KPI on which most ‘as a service’ models are built. The pharmaceutical supply chain is uniquely positioned to overcome this barrier. With stringent regulation around the tracing of drugs throughout the supply chain, pharmaceuticals appear to be a product in which this model is a natural fit. Of course, the market has yet to achieve full visibility into every drug’s journey from manufacturer to patient but the strength of this driver within the market bodes well for the future of ‘as a service’ models.
One model which is consistently cited as being one of interest by pharmacy automation providers is ‘Central fill as a Service’. Similar to fulfillment as a service in warehousing applications (discussed in a recent insight), central fill as a service requires that the provider of the service retain ownership of the equipment used for fulfilling orders (in this case, prescriptions) while charging a fee based on the number of prescriptions fulfilled. These prescriptions are filled at a centralized location which often serves dozens of retail pharmacies. The pharmacy will reduce capital expenditure while still taking advantage of the benefits automation brings, while the provider of the service is able to benefit from a large customer-per-machine ratio.
The Looming Shadow of E–commerce Over Pharmacies
E-commerce has been present within the pharmaceutical supply chain since the late 1990’s but in the last two years the topic has seen a surge in interest. In late 2019, Amazon acquired online drug retailer Pillpack. This acquisition spurred new conversation into the future of e-commerce in pharmaceuticals as for the first time, an online drug retailer had the bargaining power to stand up to pharmacy benefit managers (PBMs). These PBMs, due to the scale and nature of their businesses, have been able to negotiate rates which have made it difficult for e-pharmacy operations to scale to a truly disruptive level. With Amazon’s backing, this is perhaps less of an issue than ever.
The expectation from the market is that if Amazon is effective at scaling Pillpack, it could fundamentally shift consumer behavior. In response to this, retail pharmacies are exploring ways to bring value to customers beyond just being a location to pick up medication. A ‘click-and-mortar’ model is being explored as a mechanism for addressing this changing consumer behavior. Additionally, there is an increasing desire by pharmacies to incorporate more clinical services into the pharmacy as a means to increase the value a physical pharmacy brings. These developments require an increased level of automation within the pharmacy to meet the higher relative volume a ‘click-and-mortar’ model brings, and to free up the time of a pharmacist to support clinical operations.
These are just a few trends we’ve identified in the early stages of our research. As our research continues, we will be releasing our views on the size and growth of sales of these machines. If you are interested in participating in the research, we provide an extensive data set specially reserved for those who schedule an interview with us.
Please contact firstname.lastname@example.org if you would like to take advantage of this opportunity!