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How a Local Pharmacy Evolved Into an Industry Disruptor

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November 30th, 2022





‘Every once in a while, a new technology, an old problem, and a big idea turn into an innovation.’

Dean Kamen, American engineer and prolific inventor

The history of the pharmaceutical industry can be traced back almost 4000 years to Mesopotamia (now a region of Iraq), where the first recorded prescriptions were etched on clay tablets. However, the modern industry, as we know it, has its origins in the mid-19th century with the founding of Beecham in Britain, Pfizer in the US, and Roche in Switzerland. Beecham opened the world’s first medicine-only factory in 1859.

Although we have seen a lot of innovation in the 150 years or more since the first pharmaceuticals factory, this has largely come in the design and formulation of new drugs – the basic structure of the industry remains very traditional, and consumer levels of distrust and dissatisfaction are very high in the US.

Alto Pharmacy is a classic example of a company that started with a big idea and uses digital technology to address legacy industry problems and become a major source of innovation and disruption.

From Humble Origins…

‘This is a $500 billion market, and completely broken. There's a huge opportunity to fix it and to monetize that and create a valuable, lasting, large business and actually really help people live happier, healthier lives.’ 

Jamie Karraker, Co-Founder, Alto Pharmacy

Alto Pharmacy was founded in 2015 by two MIT graduates and former Facebook engineers, Jamie Karraker and Matt Gamache. They bought a small independent pharmacy in San Francisco’s Mission District to help them understand the needs of patients and the operational challenges associated with building a digital platform.

The founders swiftly determined that, due to the fragmentation of the US healthcare industry, the market was lacking a customer-centric holistic provider capable of aligning the interests of provider, payor, and consumer. Consequently, they started to build a tech platform that automates all the backend work and simplifies the process for all involved. The result was the creation of the only ‘next generation’ pharmacy tech infrastructure, with in-house systems facilitating prescription processing from doctor to delivery.

With its B2B2C sales approach, Alto offers its proprietary software to doctors free of charge, lowering the administrative burden on practitioners in exchange for patient recommendations. Patients are onboarded in coordination with their insurers, allowing them to receive the most affordable treatment and coverage. All prescription data feeds into Alto's centralized system to provide same-day delivery and holistic 24/7 customer service for involved parties.

Having gained a strong foothold in its initial target market, Alto is now looking to tap into larger segments, thus enhancing its growth potential by significantly increasing the size of its total addressable market (TAM).

Alto: Huge Potential For TAM Expansion

Source: Stableton (from company information).

Alto is appreciated by consumers and providers alike, averaging a Net Promoter Score (NPS) of 90 for the past four years and a 4.9 star rating on App and Google stores. In stark contrast, Alto’s competitors, the industry incumbents Walgreen and CVS, engage poorly with customers, which is reflected in a negative NPS.

Inspired Leadership Team

I think we've always been able to recruit a bit above and out of our league.’

Jamie Karraker, Co-Founder, Alto Pharmacy

Karraker made the above observation in an interview relating to the appointment of Alicia Boler Davis as the new CEO and his decision to step down from the role. His successor is an A-list executive who formerly ran global fulfillment at Amazon, where she was responsible for scaling the business and building its mission-driven culture. Alto secured the services of Boler despite intense competition from a number of Fortune 500 companies.

In her own words, Boler ‘joined Alto because of the unrelenting focus to fundamentally improve people’s lives’. She also stated that it is a mission she shares with every other Alto employee. Both Alto founders featured in Fortune’s recently published list of 40 influential individuals aged under 40, shaping business in 2022.

The founders are ‘constantly talking to senior executives as potential advisers or board members, as well as seeking individuals with the ability to complement Alto’s existing skill sets. Among others, the management team is supported by sector experts Neil Shah of Greenoaks and Softbank’s John Westcott.

Attributes For Success

Alto’s proven accomplishment with its bottom-up approach to problem-solving during the infancy of the business, along with the technological nous of its founders as MIT engineers, is key to the company’s future growth prospects and its further success in delivering best-in-class services.

By virtue of its proprietary digital platform, which easily allows for vertical and horizontal integration of further value-added services, Alto is well-placed to scale up rapidly as market opportunities arise.

Finally, in an industry characterized by weak engagement, poor consumer experience, and stigma, the altruistic element of Alto’s business proposition in aiming to help its customers lead happier, healthier lives is a genuine game-changer. The consumer healthcare giant of the future is unlikely to be one of today’s big incumbents but a consumer and value-chain-obsessed company that reinvents the landscape.

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