Apple of the healthcare world in the making

Eli Lilly launched LillyDirect that puts it in the league of companies like Apple that integrate across the value chain

Earlier this month, Lilly announced the launch of LillyDirect, a healthcare super app targeted at Diabetes, Migraine and Obesity patients. Patients can access info, tele-consult doctors, and order medicines from home. LillyDirect appears to be a thin stack model, partnering with third parties like FORM for tele-consults and Truepill for medicine delivery. It also allows patients to find a doctor for in-person care.

The concept itself isn’t new and doesn't sound counter-intuitive either. A McKinsey pharmacy consumer survey of 2021 pointed out that two main pharmacy selection criteria for patients were insurance payment availability and proximity to home or office. Home delivery of healthcare, paid or out-of-pocket, should be on everyone's radar. One-stop-shop, better! And Lilly is doing exactly that!

What excites me about this move is the potential benefits for Lilly and patients:

🗒️ Data and customer centricity – Patient data acquisition hasn’t been easy for drug makers. LillyDirect could provide access to information on sales, and longitudinal data on patient's therapeutic journey, the two important factors that could enable efficiency in marketing efforts and bring precision in therapies making the products patient-centric.

⛓️ Control – Vertical integration enables better control over the supply chain, hence improved access to medication for the patient and very efficient planning of manufacturing and inventory for the company, a win-win.

💲 Value consolidation – Cutting out middlemen could expand margins, potentially leading to cost savings for patients. The extent of this is to be seen as third-party services would still need their fair share.

⚖️ Neutrality – Third-party doctors on fixed payment (incentivized against over-prescription) would enable Lilly overcome charges of profit prioritization over patient needs.

🔌 Platform effect – As LillyDirect scales, it will create a platform effect in the industry, bring standardization in healthcare delivery, and enable other products and innovative therapies of the company to plug’n’play.

🌏 Global potential – If successful in the US, LillyDirect's model could expand to Europe and digitally advanced parts of Asia.

Such initiatives are not going to come without their own risks and challenges:

🔥 High cost implications – It costs more to deliver at home! Worldwide, last mile delivery costs have made online business unviable, irrespective of the industry. Large basket size, order volume density or high value products make last mile viable. Will Lilly play on price? Will payers accept? or Will it shift burden on OOPE?

🏭 Operational challenges – Reliance on third party services could lead to challenges to maintain the standard of service as it scales. Provisioning of products till homes of patients, in affordable and timely manner, and at a scale, bears significant operational challenge. Companies like Amazon and Apple have mastered this kind of operation through years of experience. Execution in a sensitive industry like healthcare will be prone to a high level of scrutiny.

🟰 Distributor relationships – Managing relationships with traditional distribution channels is not going to be easy. Establishment of the direct-to-patient channel could cannibalize the traditional channel. The traditional distribution market is consolidated with 3 companies controlling >50% of market share. The traditional distributors might subtly block out Lilly and provide easier access to GLP-1 competition.

It's a bold move! It sounds fascinating! It makes healthcare sound simple!

Could this be the beginning of a regime wherein life science companies position themselves as end-to-end care providers for certain therapeutic areas, consolidating complete wallet share for a disease condition across screening, diagnosis, therapy and follow-up? Will regulators allow such a regime? Too early to say.

I truly believe if Lilly plays it right, it will become that patient-centric Apple of the healthcare world, albeit, hopefully, without the hefty price tag!

This article was published by Pradyumna Murhar on Linkedin in Jan, 2024.

About the author:

Pradyumna runs independent management consulting office, with a focus on capital raise strategy, capital structuring, GTM, pricing and international expansion. His field of experience spans Healthcare, MedTech, FMCG, enterprise software and deep tech.

Pradyumna is available for a virtual meeting on Bookings and can be contacted directly on pradyumna@murhar.co