Can ScriptCo disrupt the pharmacy industry with an at-cost membership model?
The nation’s only membership-based wholesale pharmacy sits just down the road from Dallas and is paying big dividends for patients. ScriptCo is a Waco-based pharmacy whose only profits come from an annual membership fee, selling drugs at cost to members with often significant savings.
Co-founders Dr. Mark McCormick and Zach Zeller began their careers selling medical supplies to surgeons, then moved into pharmacy, running their own retail pharmacies. But they soon became disenchanted with the industry. The costs were unnecessarily high and it was not easy to understand why. In addition, everyone paid different prices for the same drugs, and it was difficult to determine the price. “We’ve seen gaping holes in the industry around access and transparency,” Zeller says.
So they decided to disrupt the industry with an innovative payment model. They would charge for a subscription (three months for $50 or one year for $140 now) and then customers would pay the same price the company paid for the bulk drugs. It sounds so simple it’s a wonder no one else has tried it. The company’s entire margin comes from membership fees and operates outside of insurance. If the company pays ten cents for a pill, that’s the price the customer pays.
But for patients with multiple long-term prescriptions, paying for membership and drug costs out of pocket is often cheaper than buying them through insurance. Doctors can order the prescription through the electronic health record, and the drug will be delivered to patients.
Zeller knows how expensive and frustrating shopping for medication can be. Zeller’s wife has migraines and found out the family had paid $44 per pill for her migraine prescription. When Zeller looked at the actual cost of the pill, he found it was only $2.99 per pill. He says purchasing the drug through ScriptCo saves his family $2,300 a year. “That’s BS,” he thought at the time. “I’m going to kick these guys in the nuts.”
Keller resident Mary Sue Farrier had a bone marrow transplant in 2008 and has been taking several medications that have helped her body accept the transplant since then. At one point, his medication was costing him $900 a month, even with health insurance. She came across the ScriptCo, and those same drugs were 40% cheaper, she says. She found the website easy to navigate, responsive customer service, and convenient delivery. “It’s so much easier, especially for people who don’t want to go to the pharmacy all the time,” she says.
Outside of controlled substances, ScriptCo sells all types of prescriptions from its facility in Woodway, Texas. The pharmacy covers 3,600 square feet and has only eight employees among business managers, pharmacists and technicians. It uses robotic fulfillment technology to fill prescriptions. Then they ship the drugs to the 48 states where the pharmacy is currently licensed.
The company has been in business for two and a half years and is currently fundraising to be able to expand its reach and operations. The co-founders started the company in the beginning with $400,000 of their own money. Currently, the society has approximately 2,400 members, including 1,500 in Texas. The model requires significant investment to get started, and there is more money to be made in the pharmacy business by working with insurance, which is more common and more comfortable for operators. “To our knowledge, this has never been done before,” Zeller says.
ScriptCo has successfully connected with self-funded employers using pharmacy to reduce prescription costs, a big part of their expansion plan. The company works outside of the health insurance and pharmacy benefit management system and sells directly to the employer to cut out middlemen who drive up prices. Some companies will pay membership fees while employees pay drug costs. Zeller says they are ready to grow and serve up to 200,000 members, although the current small staff can support up to 10,000 members.
Customers can shop around and get an immediate quote for the prescription they need and don’t have to buy anything until they see what their costs will be. Zeller highlighted a cancer drug called Gleevec that they sell that can save customers up to $10,000 each year.
People are starting to notice it. The founders appeared on the Today’s showhighlighting an antidepressant that cost $1.50 per month with a ScriptCo subscription, but ranged from $6 to $59 at various pharmacies.
Zeller says one of the challenges the company faces is that users think ScriptCo is too good to be true, but he says the proof is in the reviews. “Go check out our Google Reviews. They’re awesome,” he says. “There’s a reason other pharmacies don’t turn on their Google Reviews because you can’t delete reviews. We left ours because we focused heavily on user experience.
Will is the editor of CEO magazine and editor of D CEO Healthcare. He wrote about health care…