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E-commerce promises efficiency, transparency for health care

Not every digital tool will fit

(Photo: FreightWaves)

This is an excerpt from Medically Necessary, a health care supply chain newsletterSubscribe here.

The trend: The boom in telehealth during the pandemic brought some of the conveniences of e-commerce to health care. Now, some companies want to use e-commerce tools to make the health care supply chain more convenient, efficient and transparent. 

“There are organizations, like Google, Samsung or Apple, that are aggressively winning in health care,”  Dan Gagnon, UPS’ vice president of global health care strategy and marketing, told FreightWaves. “It’s because they’re making health care easy. That’s what’s changing the health care environment.”

In addition to tech and retail companies, more established health care players are also testing how e-commerce tools could improve their operations. 


However, the health care supply chain is more complex and more tightly regulated than many other industries. That could make it challenging to successfully incorporate these tools.

Background:  A number of retail and tech companies with strong e-commerce operations have made moves into the health care industry in the past several years.

The e-commerce juggernaut Amazon acquired the online pharmacy Pill Pack in 2018 and launched its own pharmacy brand last year. It’s now offering COVID-19 testing and is exploring additional diagnostic testing services, according to Business Insider. The company is also offering a telemedicine service that large employers can offer as a health benefit.

The smartwatch maker FitBit, owned by Google, recently announced a partnership with the health care company LifeScan that would allow diabetes patients to monitor glucose levels alongside metrics about physical activity. 


Walmart is working with drugmaker Novo Nordisk to produce its own brand of cheap, analog insulin.  

The promise: Gagnon said those moves are putting pressure on the health care supply chains to become more convenient.

“They may not be health care companies, but they excel at bringing new products and services to market quickly,” he said. “They excel at knowing what the customer needs for convenience in a digital way.”

He argued that the traditional health care purchasing model — defined by complex relationships among group purchasing organizations (GPOs), medical distributors, insurers and health care providers — has too many steps. 

Gagnon says each step adds cost and makes it harder to compare the prices of similar products. He’s hoping e-commerce tools will make the health care supply chain more direct, reducing some of that friction.

“E-commerce will absolutely have an effect,” he said. “The question is just how long is it going to take to be as seamless as Amazon?”

Case study: In July, Cardinal Health launched a new service that allows independent pharmacies to set up an e-commerce storefront for over-the-counter products.

The storefront will integrate into the independent pharmacy’s website and use the pharmacy’s branding. But rather than displaying the pharmacy’s in-store inventory, customers can order more than 11,000 products stored in Cardinal warehouses. 


These independent pharmacies are already buying drugs from Cardinal to stock their shelves. When a customer places an order, Cardinal automatically adds that product to the pharmacy’s regular, daily shipment. The pharmacies then deliver the products or ask customers to pick them up.

“It really takes the heavy lifting off of the pharmacy owner for managing a website, managing the inventory, managing the payment integrations,” Cardinal Health Product Manager Kristin Ewig told FreightWaves. 

So far, about 70 pharmacies have signed up for the $129-per-month service. 

Ewig said the e-commerce storefronts allow independent pharmacies, which likely don’t have extra time or staff to launch an independent e-commerce project, to benefit from the surge in e-commerce sales across all industries.   

However, the spike in total e-commerce sales — about a 40% year-over-year jump in the first quarter of 2021 — has also changed customer expectations. They want products delivered quickly and seamlessly. 

That’s why Cardinal is only offering the e-commerce websites to independent pharmacies capable of delivering products to patients the day after an order. Ewig said the company and the pharmacies need to show they’re competitive with e-commerce experts.

“We know that the customers expect that,” she said. “I think that’s huge, because once Amazon came into play — two-day delivery, next-day delivery — that was kind of the expectation.”

The next step is making sure customers know that they can purchase drugs online from their local, independent pharmacy, which likely wasn’t an option for most people before the pandemic. 

Cardinal is using search engine optimization (SEO) to tailor the websites to appear more frequently in search results. 

“If somebody searches for ‘pharmacy near me’ … the independent pharmacies have a better shot at popping up,” Ewig said. “That local SEO is really going to help to drive traffic, and once we drive traffic we’ll start to see more orders.” 

Case study: Last month, the biosciences division of medical device maker Becton, Dickinson and Co. (BD) also launched a revamped e-commerce website, which sells equipment used to study cell behavior.  

Todd Garland, general manager for biosciences at BD, said the new website is supposed to feel more like purchasing something on Amazon. Part of that is making it easy to buy a product, but it also means including more information so customers can do their research online.

“When I’m looking to buy something on Amazon, one of the first things I do is I look at the number of reviews the product has. I look at the ratings,” Garland told FreightWaves. 

Garland said earlier iterations of this website were essentially unadorned lists of parts numbers that were hard to search through. The new site has more detailed information that allows customers to search for products based on the question they’re researching.

While the recent growth of e-commerce has trained customers to expect fast delivery and no-nonsense returns, Garland said it also has an upside. Customers trust that e-commerce transactions will work.

“In large part because of the confidence that companies like Amazon and Walmart have developed around the e-commerce platform, we now have customers willing to literally transact for an instrument that can be as high as $100,000,” Garland said.  

When it comes to e-commerce, BD’s biosciences division is ahead of the rest of the company. In part, that’s because many of its customers are academic or biopharma research labs that have a more straightforward purchasing process than health care providers. 

However, Garland said BD can use the e-commerce architecture from the biosciences division to gradually expand into other products and other customer segments.    

The challenge: Eugene Schneller, a supply chain researcher at Arizona State University, said there are some areas of the health care supply chain that are more amenable to e-commerce than others.

He expects to see e-commerce play a big role in the pharmaceutical market as well as sales of durable medical equipment, products patients take home after a medical procedure. Those markets are similar to retail sales in other industries. Selling high volumes of medical products to big hospital systems will probably be a bigger challenge.

“I think the hardest nut to crack for an Amazon is … the large health care market,” he told FreightWaves. “The retail market is their sweet spot.”

The purchasing process for large hospital systems tends to be much more complex and less flexible than direct-to-customer retail sales, but it does have other advantages.

Matt Burns, director of e-commerce for the GPO Premier, argued that the traditional model takes advantage of economies of scale by combining demand from lots of health care providers. But he thinks e-commerce tools could coexist with existing systems and make them better.

“A model doesn’t get to stay around for 40 to 50 years without proving its viability,” he said. “But there’s a lot of inefficiencies. There’s an issue with transparency. There’s an issue with convenience. … All of those things lend themselves to e-commerce.” 

Burns said that smaller providers that don’t have huge contracts with medical distributors or GPOs will likely reap the biggest benefits from e-commerce tools. 

“If you’re unaffiliated with a large health care entity … you lack resources that they have access to. You lack supply chain know-how and staff, the ability to aggregate volume,” he told FreightWaves. “You need things like e-commerce platforms … [to] get the same access to products at a comparable price point.”

What’s next? As health care companies experiment with e-commerce, Burns argues that they should focus on linking convenient digital processes to patient care. 

That could include automating orders for items that patients need at home before or after a surgery, and then feeding that information back to a health care provider.

For health care companies, the critical factor in e-commerce success won’t be getting a patient a product faster. Instead, it will be about integrating digital tools with health care expertise, Burns said.

“There’s major e-commerce companies that have mastered these tactical processes,” he said. “In my opinion, it’s going to be some organization ingrained with the health care provider that will end up cracking this for health care.”