Modernizing Pharmacies: Redesigning pharmacies with the consumer in mind
Alto Pharmacy uses software and an innovative operations model to improve access to medication.
Getting medication to a patient requires coordination between the doctor who writes the prescription, the insurance company that provides coverage, and the pharmacy that ultimately hands over the drug. Each of those layers introduce opportunities for errors and delays — which may be one reason that around a third of all prescribed medications are never picked up.
While pharmacies have traditionally played a passive role in the medication fulfillment process, startup Alto Pharmacy has been working to transform the industry with a customer-centered approach and an engineering mindset.
The company offers a software platform that streamlines the prescription procurement process and offers digital tools to further improve the experience of everyone who plays a role. That starts with patients, who can consult with Alto’s support team seven days a week and get prescriptions delivered to their door for free through Alto’s mobile app, and it extends to doctors, through the company’s AltoMD solution that automates time-consuming prescription management tasks.
Alto CTO Jamie Karraker ’12 SM ’13 co-founded the company with current CEO Mattieu Gamache-Asselin after the two engineers met while working at Facebook in San Franciso. Alto’s platform is a result of their belief that pharmacies are consumer products just like Facebook, Google, or Uber but haven’t been treated as such by incumbent pharmacy chains.
Finding a passion
Karraker came to MIT in 2008 planning to major in math, but he discovered an interest in computer science working on an experimental project in the Media Lab that involved writing code for a large, interactive screen that allowed users to drag and “throw” items across the table-like surface to others. Karraker had never built something with code before, but he found himself drawn to the cooperative atmosphere of the project. It would not be his only collaborative experience at MIT.
Karraker likes to say he had three majors at MIT: Computer science, physics, and basketball. (He served as captain of the varsity team.)
“A startup, especially in the early days, really is a team,” Karraker says. “You work super closely with a small group of people all the time, and there’s a strong sense of camaraderie because of that. That’s a big reason why I was drawn to startups, because I was missing that [after basketball]. And the skills I learned working within a team and leading a team have been handy for me as I have built out and led a team at Alto.”
If you include the master’s degree in artificial intelligence Karraker earned in his fifth year at MIT, that makes four majors by his count. Handling that course load gave Karraker a work ethic he says has proved invaluable at Alto.
“In the early days of a company there are a bunch of different ‘fire hoses’ you’re drinking from, and you have to wear a ton of hats. MIT forces you to learn how to handle that,” Karraker says. “That’s exactly what a startup is like. You have to be really deliberate about only working on the most important things.”
Designing for impact
Karraker and Gamache-Asselin began thinking about starting a company in early 2015. The founders knew they wanted to work directly with consumers, but they weren’t sure where to build a solution.
“We were feeling a bit jaded with the Silicon Valley ecosystem,” Karraker recalls. “A lot of the companies weren’t working on the most meaningful problems. We wanted to work on something that made a tangible impact on average people’s lives and, ideally, helped an underserved population using tech. We were really drawn to health care in general, but we had no health care experience at all.”
They did some research and settled on the pharmacy industry as their target because it was the closest thing they could find to a consumer product in health care. Then, after raising a seed round, the founders made a bold move to accelerate their learning curve in the industry: They bought a small pharmacy in San Francisco.
“We dove in head first and learned by fire how pharmacies work, by owning and operating our own pharmacy,” says Karraker. “We learned a ton in that first couple of months, working out of the closet of this pharmacy, and just sort of discovering all of the deep-rooted issues within pharmacies and their operational workflows.”
The founders prioritized efforts to improve coordination between different stakeholders; their current software platform, featuring AltoMD, is a key differentiator from other medication delivery companies like PillPack.
“[As we’ve built solutions], we’ve really gone deep into pharmacy, and we’ve been able to sort of peel off more layers of the onion of the industry, find more problems, and fix them with better software and better processes that in turn lead to a better patient experience,” Karraker says.
As the company has built out its software capabilities, it has also crafted an efficient operating strategy. While traditional pharmacies rely on many store locations within a single area, each with its own small staff, Alto operates out of one fulfillment center in each of its San Francisco, southern California, and Denver locations.
“In the delivery radius [of our location] in the Bay area, there are actually 400 brick and mortar Walgreens stores, so we’re saving a huge amount of money on retail space, real estate costs, and managing inventory, all by centralizing and building software to do everything more efficiently, allowing us to do the extra things we do, like free delivery.”
Alto also works to get patients the least expensive medications by automatically looking for coupons or working with doctors to find alternative medications if the ones prescribed aren’t covered by insurance. Those seemingly simple tactics are rare in the pharmacy industry, but they’ve saved Alto customers more than $10 million in medication costs to date.
All those services increase medication adherence rates and have led customers to rate Alto four times higher than big pharmacy chains, according to the company.
Alto is fresh off a $50 million funding round it closed in December, and the company is up to over 200 full-time employees (with almost as many delivery drivers), but Karraker says his team will continue working closely in the cities they currently operate in before expanding to other cities toward the end of 2019. The plan is designed to ensure Alto maintains its positive impact on patients as it scales.
“We realized early on that pharmacy is a really broken experience for the patient,” Karraker says. “At the same time, none of the incumbent pharmacies really have the mindset to think of themselves as a product. We wanted to apply a product-focused mindset and start with the user experience, and we’ll just continue to prioritize the user experience going forward.”
source: Massachusetts Institute of Technology