The Pharmaceutical Journal Vol 264 No 7092 p576-577
April 15, 2000 Business

pharmacy2u.co.uk

Pushing forward with e-pharmacy

Pharmacy2u is planning to relaunch its site (www.pharmacy2u.co.uk) to the public shortly following a redesign and an overhaul of the "back office" management and fulfilment systems which underpin it. The relaunch will be accompanied by a consumer advertising campaign using regional radio and newspapers. Mr Lee said that the business already had as many registered customers as an average community pharmacy business and that it was on target to achieve end-of-year sales of around £2.5m. This had been achieved without any direct consumer advertising. "We are selling products and we have a revenue stream," he added, drawing a comparison with some of the other internet health portals which were currently rushing to the market. "We have a solid business plan for a long-term business."

Daniel Lee: We created a tremendous buzz in the pharmaceutical industry

Daniel Lee comes from a pharmacy family and his father owns four pharmacies, trading as Lees Pharmacy, in east Leeds. After graduating from Sunderland university in 1991, Mr Lee undertook his preregistration training with Moss Chemists (as it was) at the time the company was acquired by Unichem. He then joined his family company as general manager, working to rebrand and redevelop its pharmacies. He also undertook a masters in business administration degree at Durham university sponsored by the Northern and Yorkshire office of the National Health Service Executive.
Mr Lee said that he had always believed that group pharmacy practice was the way forward for independent community pharmacy. He had helped to propose a motion on this subject at the British Pharmaceutical Students Association's annual conference at York in 1992, along with his friends Joel Hirst, Hooman Ghalamkari and Tariq Muhammad. However, he had been frustrated in his efforts to bring together three pharmacies located close to each other in Leeds and this had prevented him from breaking into medicines management activities as he had wanted to.

Internet interest

His interest in the internet started about 12 months ago when he had been trying to obtain information about a medical condition for a family member. Among the many sites he had visited was the American online pharmacy Drugstore.com. At this point, he began to wonder whether the same concept could be used in the United Kingdom.
"I spent about three months learning about the technology behind the internet and making initial inquiries with the Royal Pharmaceutical Society and the Medicines Control Agency. Both told me categorically that this kind of operation could not happen in the UK."
He started to recruit for a new business venture, taking on Stephen Dobson as webmaster for his internet site and linking up with Dr Julian Harrison, a friend from university, who had been working as a consultant to Glaxo Wellcome on e-business with Anderson Consulting. Together they formed Pharmacy2u. About five months' work had been put into developing the website and the protocols for it.
He had taken his own legal opinions on the interpretation of the Medicines Act 1968 and the Society's Code of Ethics. The Medicines Act, obviously, took no account of the internet, being written in the 1960s. These opinions convinced him that an internet operation was possible within the spirit of the law and the Code.
The new company operates from a pharmacy at Harehills Lane, Leeds, formerly owned by a competitor, which remains registered with the Society. His family's company has a branch across the street.
At the beginning of November the company became aware that Allcures.com was planning to launch a similar service and so, as Mr Lee said: "We picked up the pace and went live on November 22" (PJ, November 27, 1999).
He described the launch of the site as being "well received in the main". The week after the launch the company was visited by a delegation from the Society including Mr Stephen Lutener (head of enforcement), Mr Ian Shepherd (head of information technology policy unit) and one of the Society's inspectors. Mr Lee described them as "constructive and well informed" and said that it was clear that they had done their research on the subject. They had looked at the company's systems and protocols and made a report to the Society's Council which was followed by interim guidance being issued (PJ, January 1, p9).
"We created an amazing buzz within the pharmaceutical industry and as a result we have had discussions with representatives from many major companies."
Mr Lee said that the pharmaceutical industry realised that the internet, through sites such as Pharmacy2u, offered a new channel of communication to customers. Targeted direct-to-consumer advertising was possible based on the categories of products customers were looking at. There were also opportunities for sponsored information provision, links to other websites and the provision of e-commerce for companies and their branded products. As well as pharmaceutical companies, Pharmacy2u had signed marketing agreements with other online providers, including banks and portals.
"Our aim is to be the online pharmacy of choice," Mr Lee said. This would mean demonstrating that the company was both modern and innovative, but also that it could be trusted.
"We want to provide the information which customers would expect to get in a community pharmacy and to provide information about community pharmacy itself."

Delivery and insurance

Two areas of contention had arisen when Pharmacy2u launched its service, namely, the delivery of medicines by third parties and the provision of professional indemnity insurance. There have been developments in both areas since Pharmacy2u launched. Initially, Pharmacy2u had established a joint venture with a courier company. Following the visit by the Society, Pharmacy2u had started proceedings to purchase the courier company outright. However, Allcures had gone along the third party route and was using Parcel Force and Securicor for its deliveries and this had subsequently been deemed acceptable. Had Mr Lee considered selling the courier company or suing the Society? "No. We want to go down the route of doing our own deliveries. We are still going through with the purchase. We are expanding the fleet of delivery vans and rebranding them as Pharmacy2u. We now have 35 vans operating out of our Leeds depot and we want to open depots in Newcastle, Birmingham, Manchester and London. "Delivering medicines all over the country is costly and we are going to use couriers for some outlying areas, but we expect to have over 75 per cent of our orders delivered by our own trained drivers. As superintendent pharmacist, I want control of the supply chain."

Pharmacy2u operates out of registered premises in Leeds. A new depot is planned for next year

He described fulfilment of orders as being the key to a successful online business. Changing lifestyle patterns meant that the company would need to consider evening and weekend deliveries in order to meet its customers' demands. In addition, Pharmacy2u was planning to sell its fulfilment capability to other companies. "We will be delivering flowers for Marks & Spencer in the north of England," he said.
"Without the old-fashioned business of delivery the online service will not work. The beauty of the new business is the information we can obtain about our customers and how we can use it."
Pharmacy2u had to approach the insurance market at Lloyds of London in order to obtain cover, after the National Pharmaceutical Association had declined to offer cover, taking the view that its services were not part of the normal course of running a pharmacy business.
Mr Lee was scathing of the NPA: "Many pharmacies will be running e-commerce in their localities. The NPA should take its head out of the sand and take a lead on this rather than being antiquated. The NPA is in a position to offer a lot of services to its members and to help community pharmacy as a whole.
"If the NPA is worried that the whole network of community pharmacy is going to disappear as a result of e-pharmacy, then that is not showing great confidence in its members' businesses."
He reiterated his belief that independent pharmacies would have to look at working together in the future. Group practices, with more than one pharmacist per pharmacy, were going to have to be the way ahead for community pharmacy as they had been for general medical practitioners. He believed that the NPA should be taking a lead and encouraging its members to get together. Such group practices might also help with the current manpower crisis, which he felt was in part due to the fact that newly registered pharmacists were reluctant to enter community pharmacy as it currently stood.

E-pharmacy future

Looking ahead, Mr Lee said that current estimates put the number of online shoppers in the UK at between 3 and 5 per cent of the population in five years' time. This was around 2.5m people - "much larger than the customer base of any community pharmacy". These were conservative estimates and had been used in the company's business plan.
At present Pharmacy2u only dispenses private prescriptions. These account for about 5 per cent of the total market but are easier to deal with because the customer pays for the product. There are not the problems of obtaining an NHS contract and dealing with NHS reimbursement.
"We are looking at NHS dispensing, but we want to do it professionally - and profitably. I do not expect us to enter this market until electronic prescription transfer becomes the norm and we can influence where the prescriptions go. This will probably take three to five years, but that is where we see a lot of our revenue coming from when prescribing goes electronic."
The company is planning for its expansion. It is moving its administration to temporary offices nearby, leaving more room for the pharmacy, ahead of a move to a new office and warehouse in Leeds next year.
The company is also putting in place a new top management structure. Recent advertisements in national newspapers for a marketing director and a finance director had brought in over 100 applications for each post. Appointments to these positions were expected to be finalised shortly.
As to the competition, Mr Lee expects Boots the Chemists to move online at some stage. "It will eventually come in and take market share through its marketing muscle and the awareness of its brand, but, meanwhile, we are taking up some of the space. Boots has a ‘bricks and mortar' approach to retailing at present and it will have to change the way it works."
AAH Pharmaceuticals and Unichem Ltd would both have conflicts between their own pharmacy chains and their independent pharmacy customers when they tried to develop e-commerce businesses, particularly if these were selling direct to consumers.
He described the past few months as being "exciting": "It's been great to be part of a new industry and creating that in the UK. What we have been doing shows pharmacy in a good and professional way."
He expected e-pharmacy to run in parallel with existing community pharmacies, giving patients a choice.
"It will not lead to the demise of community pharmacy, but some of the worst pharmacies do need to realise that there is competition out there."