Setting up an online pharmacy is one of those options where you not only fulfill your entrepreneurial dreams but also get the satisfaction of helping people lead a better, healthier life. The idea of an online pharmacy is centered around offering a wide choice of non-prescriptions OTC (Over The Counter) drugs, filling out prescriptions, delivering in time the drugs purchased to patients and making their lives a great deal easier
And yet, online pharmacy – also called distance-selling pharmacy – is largely an under-explored business even today. In 2016, prescription drugs to the tune of $158 billion were sold online in the USA alone. Compared to the entire pharmacy market, which is estimated at a little above $100 billion, the online sales stand at a mere 0.15% of the entire pharmacy business. This suggests a huge untapped potential.
The Business Model of Online Pharmacy
The premise sounds simple. Just like any other eCommerce business, you can sell products online – OTC and prescription drugs in this case – and make a profit.
Online pharmacy business models are mostly classified into two categories, based on how they operate and make money.
Pricing strategies are important for online pharmacies too, like the rest of ecommerce businesses
The first kind is where the online pharmacy itself stocks a huge number of medications. A customer first submits a valid prescription for the medicines they wish to purchase. The online store confirms the availability of the items required and the customer makes the payment. The online pharmacy then ships the medicines to the customer.
The second kind is different in that they don’t stock the medicines themselves. Instead, they partner with local brick-and-mortar pharmacies. When the customer makes an online request the online pharmacy checks which partner pharmacy is closest to the customer’s shipping address or can best deliver the order. They collect the payment, instruct partner physically deliver the drugs and share the revenue as per conditions agreed upon.
Startups are bringing in various changes to introduce in different levels of value additions. For instance, while online pharmacies require customers to submit the prescriptions online, some startups also arrange to have the prescription physically collected from the customer’s location. Apart from value addition, this method lets the pharmacy better verify the authenticity of the prescription.
As far as making profit from the online business model is concerned, the following are the most common sources:
- The online pharmacies profit is the difference in the cost versus the selling price of the items they sell. The cost will include additional expenses like storage costs and shipping charges.
- There is an opportunity to make money from featured products. Makers of OTC drugs or cosmeceuticals (products combining benefits of cosmetics and pharmaceutical) will be willing to pay money if the online pharmacy agrees to display their products prominently, give top listings during searches within the website or provide decent product reviews in blogs.
Nutritional supplements are an important source of revenue for online pharmacies
- They make a good profit from selling calcium fortified drugs, protein supplements and similar products. The volumes may be smaller, but the profit margins are higher.
- They can carry advertisements. Established stores can earn good money by accepting ads or announcing third-party blogs and newsletters. They may choose to enroll with Google Adsense or directly negotiate with the advertisers.
Online pharmacies are a good platform to advertise products
- Online pharmacies may also be able to arrange video-consultations of patients with registered medical practitioners. In return, the medical practitioners pay a certain fee to the online pharmacy.
Online pharmacies can arrange for doctor consultations
- Tying up with institutions like retirement homes is an option worth pursuing. The residents of such institutions may have restricted mobility. Hence, purchasing medicines online make a lot more sense to them.
Features of an Online Pharmacy
An online pharmacy, at the end of the day, is a commercial enterprise. That means it must have all the features that are common to the business.
The following features are the ones that are unique to online pharmacies.
- Display clearly your must-have certifications
Firstly, you must build trust about your legitimacy. On your website, display all affiliations and licenses clearly so that first-time visitors can easily find them.
For online pharmacies it’s important to build trust
- Show complete product information
Display as much information as is required and advisable. Customers, present and potential, should be able to spot products easily. Highlight all that information that is statutorily required as well as information you, as a pharmacist, belief should be shared with consumers of medical formulations.
- Carry a customer credentials section
Customers base many decisions on genuine reviews. Place the reviews so newcomers can check out what kind of service you are offering.
Just as anywhere else, online pharmacies too benefit from positive customer feedback
- Instill trust by safe payment features
Customers must feel completely safe when they may payments. Show prominently how your payment gateway is superior in terms of ease and safety.
- Consider having an app
An online store can be wonderfully complemented by an app. Customers will find an app a lot easier to buy from. At some stage you’ll want an app, so why not earlier than later?
- Highlight events
Part promotional, part social responsibility. You can have a section or run a banner dedicated to health-related events or articles. This can include schedules of vaccinations, notifications of flu in a particular area and so on.
Online pharmacies are a good platform to advertise products
- Respect privacy
Your customers buy online because they want convenience. A number of them also seek privacy while buying from you. Make sure your systems are geared towards ensuring the privacy of your customers. This is not only ethically appropriate but also legally required.
Customer privacy is both important and legally required
- Act responsibly and ethically
Respect the law of the land. Take every reasonable precaution that you’d take if you were a physical store.
- Offer to stay connected
An online pharmacy can offer newsletters for better engagements. In return, it will connect email addresses to build a mailing list.
Build a mailing list by offering newsletters
Now that you’ve understood the prerequisites and the features of an online pharmacy, it’s time for a step-by-step guide for building an online pharmacy. This guide will help you understand the steps, and the sequence required when you are setting up an online pharmacy.
#1 Understand the Laws Governing Online Pharmacies
Owing to all these complexities, various countries already have in place laws and guidelines intended to regulate the sales of pharmaceutical products. However, they are almost exclusively focused on physical stores and not on online pharmacies. Hence, there are many grey areas in the laws of some countries. This makes setting up and running an online pharmacy a challenge.
- There must be a registered, licensed pharmacist at the head.
- The pharmacist’s license must be valid in the territory from which online pharmacy sells and the territory to which the medicines are dispatched.
- A registered, licensed pharmacist must be in charge and oversee operations, including verifying prescriptions, storing requirements and approving of the purchase.
- The pharmacy must source drugs only from legally recognized suppliers or manufacturers. Carrying or selling counterfeit drugs is a serious offense.
Recognition from various organizations boosts an online pharmacy’s reputation
- Depending upon the country you operate in, the local drug regulating agency (e.g. the FDA in the USA) may have put up a list of restricted items that cannot be sold without an in-person examination.
- The online pharmacy must exercise the same caution as a physical store while selling prescription drugs to refrain from charges of malpractices or extreme negligence.
- In all likelihood, your premises will have to be approved of by the local statutory body before you make the first sale.
#2 Select and Secure Your Brand Name and the Domain Name
This is one thing you’ll want to do as early as you can. If you’ve selected a proprietary or a partnership structure for your business, you’ll need to separately register your brand name (for LLC and incorporated firms, this happens by default when you register your business). What’s important is whether a domain name is available with the desired extension; most likely you’ll want a dot com.
#3 Decide the Structure of Your Business and Get Licenses
If you are a registered pharmacist, great! If you aren’t, you’ll need to bring in one. The pharmacist may be a paid employee, a business partner or a board member. Check out the laws prevalent laws in the country you will be operating from, to see if there are any restrictions regarding this.
Next, you’ll be fixing the legal structure of your business. You may structure your business as a single-owner proprietor, a partnership firm, an LLC or an incorporated organization. The complexity of the paperwork varies from country to country. Depending on the structure you choose and the laws of the country you plan to operate out of, you may be able to handle the application process yourself or may need the help of an agency.
Being a sole-proprietor is not considered a safe way of doing business because all the liabilities of the business also become the personal liability of the proprietor. An LLC or an incorporated company, on the other hand, acknowledges that the board members and the company are two distinct entities. That means the liabilities of the company are not considered to be the personal liabilities of the business promoters.
Finally, go through the process of getting appropriate permits and licenses. You’ll be required to satisfy most requirements that exist for pharmacies with the physical presence. Additionally, the licensing authority will want to ascertain you have established the right checks and balance for verifying the authenticity of prescriptions.
#4. Choose the Right Platform for Online Pharmacy
Once you have understood the regulations, it’s time to better grasp the features various technology platforms offer.
Broadly, there are two types of technology platforms for eCommerce: Open source and Hosted (Closed source) platforms. Here is a brief comparison of the two. (For a detailed comparison between Magento and Shopify you may want to refer to our post-Magento vs Shopify: What should you choose?)
- Most versions are free of cost or freemium.
- Great flexibility available
- You take care of the domain registration and hosting
- Customer support not available for the free of cost models
- Shopping carts are not always included
- Strong independent community of users and developers can help you in countless ways
- Examples include Magento, X-Cart, Drupal, and OpenCart
#5. Identify Suppliers and Delivery Partners
Since your online pharmacy will sell sensitive products – medicated formulations, health supplements, OTC drugs – it’s extremely critical you select your suppliers and other partners responsibly.
Logistics is critical to an online pharmacy’s success
There is always a huge risk that your supplier may supply you poor quality substitutes, spurious drugs, drugs not stored as per required instructions, drugs manufactured by manufacturers with poor quality control or drugs that are well past their expiry date. It is strongly recommended you take a lot of care and invest a lot of efforts in identifying only recognized and reliable suppliers. For bulk quantities, you may be able to strike a good deal with the manufacturers themselves.
If your business model is one where local pharmacy stores will directly supply the drugs to customers based on your instructions, you need to be sure they will be following the standard operating guidelines expected. Drugs and medical formulations being highly perishable items, your delivery partners must follow best practices in a storage of products.
#6. Establish the Workflow and Systems for Your Online Pharmacy
One challenge that online pharmacies need to overcome is the way they will handle a prescription and verify its authenticity. For instance, in the USA the National Association of Boards of Pharmacy has come up with a program called Verified Internet Pharmacy Practice Sites. It approves of, among other things, authentication and security procedures, and quality assurance policies. If you’re in the US, you’ll want to have this certification. Outside of the US, you’ll need to do a little homework to find how you will be able to authenticate various processes.
While dispensing out medicines, you’ll need a strong system in place to make sure there are no errors. You can consider products for pharmacy automation: they increase efficiency and let your team more time to focus on promotional or customer-centered activities or on the CRM. For instance, you can use automated dispensing machines, like the ones offered by Scritpro, Kirby Lester or Parata.
Pill counters such as this increase efficiency and reduce errors to almost nil
Another important component in your workflow is counter-checks. Are your technicians checking all the information regarding the drug before preparing it for dispatch? You can build this small check inside your pharmacy software. For instance, you have a list of checkboxes that your technician must check individually, to show all steps are being followed. Alternatively, you can keep certain features in the off mode as the default stage. As the technician follows each of the steps, these features get ‘unlocked’. This way you know nothing has been omitted. Of course, the chief pharmacist may have the master access to skip some steps that the technician has already checked and/or are not vital.
Finally, you’ll need to establish proper systems for storing and returning drugs that have passed their expiry date. Make sure you comply with all regulations and follow the right procedures.
As you have surely observed by now, setting up an online pharmacy is not that difficult, provided you have the right planning and the right agencies that can help you through the eCommerce store development and design.