Building A Pharmacy That Works For Everyone - Eric Kinariwala, Founder and CEO of Capsule

SHIV GAGLANI:

Hi, I'm Shiv Galani and today on Raise the Line I'm happy to be joined by Eric Kinariwala who's the founder and CEO of Capsule, a New York based digital pharmacy startup that has expanded to Chicago, Boston, and Minneapolis. Capsule is considered a leading disruptor in the pharmacy industry by offering fast delivery and having pharmacists on call 24/7 to talk to customers among many other benefits. Prior to founding Capsule, Eric invested in global health care, technology, and retail companies as part of the investment teams at Bain Capital and Perry Capital. So Eric thanks for taking the time to be with us today.

ERIC KINARIWALA:

Thanks for having me Shiv.

SHIV GAGLANI:

So can you start by telling us a bit more about your background and what got you interested in the digital pharmacy space in the first place.

ERIC KINARIWALA:

Sure. I was living in New York City in 2015, living on the lower East side of New York. I woke up one day with this totally killer headache. I called my doctor and I asked him, "My head's exploding, what should I do?" And he asked me a series of questions and finally basically he was like, "Hey, don't worry about it, you've got a sinus infection. I'll call a prescription and go get it." I was like, "perfect." I put my coat on and I went out in this like snowy January day and I went to this chain pharmacy around the corner from where I used to live and literally everything you can think about going wrong with the pharmacy went wrong for me, starting with me entering around the store and I can't find the actual pharmacy. Finally this person comes up and taps me on the shoulder and is like, "Can I help you?" as I'm kind of trying to wade my way through aisles of greeting cards, candy bars, cleaning supplies, cigarettes, and stuff.

So finally I get to the back of the store and there's this escalator and it's broken. So I walk down this broken escalator and I get to this dark and dingy basement where there's 40 people in line ahead of me and my cell phone doesn't get signal.  I end up waiting in line for an hour. Long story short, I get to the counter, ask the pharmacist for the prescription my doctor had called in and she kind of has this really sad look on her face because she's like, "Hey, I'm really sorry, we're out of stock." So I ended up going home no medication in hand, went to bed, woke up the next morning.

And that was the catalyst. That was the spark for me to start just unpacking my own experience around pharmacy and “what just happened? Is this common? Is this uncommon? Why are there so many pharmacies everywhere?” And coming out of that experience, that was sort of the foundation and the spark of what we've been doing at Capsule over the last five years.

Then what I learned we're a handful of things. Probably the most important thing I learned was that my experience wasn't all that uncommon. Tens of millions of people across America go to the pharmacy monthly. Hundreds of millions of people go to the pharmacy at least once a month. That experience hasn't changed in 50 or a hundred years for people. It's this enormous category, it's $400 billion and it's completely offline. It's like 1-1 ½% online.

So you've got this thing that is sort of an omnipresent yet invisible as part of the healthcare system and there's so much opportunity to create a better experience. The kind of importance of that is, one out of two prescriptions in America goes unfilled because of all of these kind of familiar frustration points. So what we set out to do five years ago was to create a delightful, a seamless pharmacy experience for people to really solve a lot of those very consistent friction points that lead to people not getting their medications. And so that's always been sort of the core of what we started doing. And then as we've dug in, we've learned a lot more about the role of pharmacy in the broader healthcare system and the role of the technology platform that we've built. I'll talk more about that later.

SHIV GAGLANI:

Similar story to many we’ve heard from guests we've had on Raise the Line podcast. We had Florian Otto on a couple of weeks ago, who you may know from Cedar. A medical bill that he and his wife received was so antiquated that, that's what led him to starting Cedar. So similarly, your unfortunate pharmacy experience led to starting Capsule. Can you give us a sense of scale, pre-COVID. You've been expanding to multiple cities. Do you carry all the potential available drugs? And then how many pharmacists do you have and staff? I think our audience would love to hear those kinds of things.

ERIC KINARIWALA:

Sure. So one of the things that we decided from day zero was that the mission of the business would be to build a pharmacy that works for everyone. And that means two things. One it's, we want to make sure we serve every consumer that is out there, but also that we want to be able to serve the broader healthcare system, and to be a channel partner and to help make doctors’ and their staff’s lives easier. To help make insurance companies, who are paying for billions of dollars of medication, make sure that they're effective and people understand how they work. To make sure that hospitals and drug companies and everybody in that chain is benefiting from having access to the consumer and that the consumer ultimately remains at the front and center of what we do day in, day out.

The team in New York is about 700 full-time people and continues to grow.  We’re always hiring really smart people, so folks can see open jobs on the website. As part of that mission to serve all consumers, we take insurance, we accept whether you're rich or poor, we accept Medicare, Medicaid, commercial insurance. We stock branded drugs, we stock generic drugs and we've built out a bunch of algorithms to make sure that we're in stock at an incredibly high rate. At conventional pharmacies, the pharmacy's out of stock 40% of the time you go. We've taken that number about as close to zero as you can go with the elements of the supply chain that we control. I think it's important because it's important that people have one pharmacy they use, and it's important that we can check for drug interactions and stuff.

So whatever your medication need is, Capsule supports you and it looks after you and makes sure that it is not only easy to get, but more importantly, easy to manage day in, day out. You know why your doctor wrote it, you have easy access to the instructions, you've got price transparency, you can extra chat with the pharmacy about questions about your insurance or about your drugs. And then all of those things are just in the palm of your hand, on your phone.

SHIV GAGLANI:

Yeah. It sounds super convenient. In your intro I mentioned two of the benefits -- fast delivery, and having pharmacists on call 24/7. Can you talk a bit more about how fast are we talking about in your example of having a sinus infection in New York, being able to walk through the Dwayne Reed or wherever you were going, like around the corner, could be within the matter of hours. I know Amazon has obviously set the stage for like one hour and drone-based delivery. So how fast are you talking about? And then also how do you give pharmacist access 24/7? Does that mean you're having pharmacists internationally as well?

ERIC KINARIWALA:

So two things. One, I don't think that the speed of delivery at Capsule is amazing and the experience is magical. If you live in New York, you can get your prescriptions in two hours from the time your doctor writes it in. But that's not really why people love using Capsule, why there's thousands and thousands and thousands of like raving fans according to the Google reviews in the app store and Twitter. People love Capsule because the entire experience end-to-end looks after them and anticipates their needs. Capsule will never be faster than taking the elevator down, if you live in New York, and go to your Dwayne Reed. 

And yet we still have hundreds of thousands of customers that have pharmacies in the basements of their apartment buildings or around the corner that love using Capsule and use it month in, month out. What we've learned is that it's really not about the speed of the delivery, it's about all of the other things around the experience that the technology platform enables that makes it really, really frictionless and easy to do something that has historically been really complicated. And that you have somebody that's in your corner, looking out for you. Whether that's helping you understand complicated things -- like what is a formulary, what is a deductible? Why did they cost more last time than this time? Why does it cost less this time than last time? Who's making sure that when you run out of prescriptions, someone's coordinating with your doctor, so you never have to worry about any of those things.

We built the entire experience around this idea that like, if your mom was a pharmacist and you were the only customer in the world, what would that experience look like? And that experience would look like what Capsule feels like. Your mom would make sure you've got the best price, she'd coordinate with your doctor, she'd make sure you knew how to take it. Of course, she'd bring it to your house, but she'd make sure on an ongoing basis that you were looked after. And that's the key thing about Capsule. That the technology enables our pharmacists and everybody that works at Capsule to be focused on the things that humans are uniquely good at and let technology do the things that technology is really, really good at. Our pharmacists are 24/7. You've got pharmacists depending on the market, usually 8:00 AM to 10:00 PM that consumers can interact with.

SHIV GAGLANI:

I love that way that you put that…Capsule is like your mother, somebody who really just cares about you and is trying to kind of preempt some of the questions you have. One thing I know about the pharmacy space is there's a lot of confusion, not only in terms of how to get your prescription drugs and price transparency, but a lot of questions around medication adherence and which medication is better, why was this SSRI prescribed versus that SSRI? What role do you see education playing for your end users, people who subscribed to Capsule? And do you do provide that, or do you partner with groups like Epocrates and others on that?  

ERIC KINARIWALA:

We've got medication information right on the website or in the app so you know side effects, dosing, your doctor's instructions and then if those things are not clear or you want additional details, we've got a team of pharmacists that you can access, however you want. So you want to talk to a pharmacy, you can call us. If you want to do that between meetings and be texting or chatting in the app or on SMS, you can do that. Then we've got an expert team of pharmacists that can answer any and all questions about medications. Everything from, “is it safe to take generic? I heard generic are not the same as brands.” And our pharmacists can help you understand whether that's true or not, and where that matters and not, and what are the important things to understand all the way down to like, "can I drink milk with this medication or not, or is that going to make me sicker?"

Any variety of questions you might have. It's the best of technology in that it lets people communicate in a form factor and in a privacy sort of mode that they want to. But you still have a real human on the other end so that half of Chicago or half of Salt Lake City isn't hearing your personal medical details while you're in line at the pharmacy counter.

SHIV GAGLANI:

Yeah. That makes total sense. So fast forward. You started this five years ago or so. This year has been a year of tremendous change. We've had a lot of people on Raise the Line who are in telehealth companies. People like Brad Younggren, chief medical officer of 98point6 and Sophia Yen at Pandia health, which is birth control delivery. I would love to hear your own experience with COVID. You especially having been living in the former epicenter of COVID. How has Capsule adjusted both in terms of a company with hundreds of full-time employees in New York -- perhaps going officeless -- as well as obviously what tailwinds or headwinds you're seeing for the company itself and your end users at Capsule.

ERIC KINARIWALA:

New York was the absolute epicenter of COVID and I think one of the things we learned was that before COVID, Capsule became something that people were aware of and loved, but it was perhaps more of a convenience than something that was essential. As soon as COVID really sort of became a very big problem in New York, Capsule went to something that was an essential part of the healthcare infrastructure of New York. So the first thing we did, and the most important thing, was making sure our team was safe and taken care of. We did a number of things in our physical pharmacy which continued to operate and has operated every day through the entire pandemic serving New Yorkers, making sure people have continued to have and had safe uninterrupted access to their critical medications.

And then we did a number of things to support the communities. We partnered with various sort of local community and government agencies to make sure folks like the elderly who were at the highest risk of contracting COVID by leaving their homes had access to medications that had easy access to Capsule. There were a number of other things with hospitals and other folks around the healthcare infrastructure in the city. Then we basically said, "look, we've learned a lot in New York," not only over the last couple of months, but we've spent a long time in New York, really building the infrastructures that we could rapidly scale in New York. So we were able to sustain an unbelievable surge of demand particularly in March and April. The team just stepped up and did an amazing job serving New Yorkers.

We took the model pretty quickly to other places that have been hard hit -- Chicago, Boston, Minneapolis -- and applied that expertise gained in New York at the epicenter to support those local communities as they managed through the pandemic. Then I think not dissimilar from a lot of people you've probably heard on the program, we took our entire team remote, outside of the folks in the pharmacy and the couriers on the road. We took the entire team remote effectively overnight, across the board. And I think the team is adapting. I think the team is super resilient and has found some things that are, I think better being remote and then other things that are more challenging. I think the team's kind of working through it in a pretty productive way. So that's been really energizing to see.

But I think it's been a really tough kind of six months for a lot of companies and a lot of leaders and a lot of teams. We've had the great benefit that our business is in a position to help and has actually a pretty massive tailwind, not only just from more people using Capsule, but also strategically I think, as you talk about some of the other kind of parts. One of the things that's happened is that the entire healthcare system had to digitize overnight as a result of COVID, so whether you were a solo practitioner or a physician, or you're a large health system, you had to rethink the way you did everything and all of that had to be viable and work in a digital world.

What we're seeing is that people are very much increasingly wanting to partner with Capsule because of the expertise in the technology platform that we've built over the last five years. We announced late last year that we power and partner with Oscar on their virtual care visits. We announced something with Hims and Hers on their virtual primary care to power telemedicine, the pharmacy part of telemedicine. And what we're seeing in a lot of different pockets of the healthcare system is that people want to create seamless end-to-end digital experiences and they need to partner with companies that have built their APIs and the technology that enables that to happen in a really seamless, customizable, personalized way. So I think that probably the longest lasting impact of COVID is that people revisited their experiences end-to-end to really understand how do we make these work in a really delightful and seamless way in a world where there's just going to be significantly more uptake of consumers engaging with their healthcare digitally.

SHIV GAGLANI:

Yeah, totally. One of the main benefits of having lots of podcasts and having guests, is just getting a 30,000-foot view across the healthcare system from leaders of actual large healthcare systems like Providence's Amy Compton-Phillips to innovators like yourself and other digital health companies. Just seeing how old guard and new guard are sort of interacting, getting along, hopefully, and finding ways to make some of these COVID catalysts permanent changes in the healthcare system. So if you look in the future five years, where do you see Capsule playing? Obviously more cities, maybe faster delivery, maybe more formulary, but what are some of the other things that you want to see Capsule achieving in the space?

ERIC KINARIWALA:

The mission of the business has always been to build a pharmacy that works for everyone. So the ability to continue to work with physicians, to work with large provider groups, to work with health plans, to partner with drug companies and to make all of those folks lives more successful clinically and financially is where we have been investing and where we have, ultimately, always believed the business had the most ability to be impactful on the healthcare system. And of course, all of that starts with making sure that consumers continue to love using Capsule, but being able to bridge the consumer and the rest of the healthcare system is an incredibly powerful thing that is pretty meaningfully missing today.

Our ability to really partner with folks and support them in their own objectives -- whether that's driving more adherence, whether that's being able to provide more education about disease conditions or how drugs work, whether it's being able to create real-time data feedback loops through the technology platform -- those are all things that are places that we're investing and places that in some cases already executing on, and other places things will be in the marketplace pretty soon.

SHIV GAGLANI:

It will be really exciting to see kind of those innovations you guys are coming up with given how quickly you've been growing especially this year. Our audience does comprise people who are interested in their own health. We have a lot of patients and family members who consume our content, but the core group are current and future health care professionals, including pharmacists, who you may be employing in the future. What advice would you give to someone considering a career in healthcare about meeting the challenges of COVID and beyond?

ERIC KINARIWALA:

I don't know if I had a healthcare specific career advice. I'd probably have just general career advice for whatever that's worth. One of the philosophies that I think we have tried to stay pretty true to at Capsule as we think about talent development, recruiting, how we sort of coach and develop people, is really this idea that I think people should double down on their strengths. Usually the things you're good at are the things that energize you and there's usually a pretty quick feedback loop on that. So I think identifying the things that you're good at and identifying the things that are energizing for you, and then doubling down on those things.

I think smart, motivated, ambitious people always gravitate towards wanting to work on their weaknesses. And I think there's an alternative perspective maybe that's not as popular or common but, I think if you can double down on the things you are great at, the potential is pretty limitless. I'd encourage people to find roles and environments that bring out their best work. Above anything else is, are you going to be in a role of doing work with people, a manager, or a team where you can get to spend the vast majority of the day doing things that feel fun and not like work, and then I think everything else takes care of itself.

SHIV GAGLANI:

That's really valuable advice. Thanks for sharing that with our audience. I know we're coming up on time.  Is there anything else you'd like to be able to share with our audience about you, Capsule, overall trends in healthcare?  The floor is yours.

ERIC KINARIWALA:

I think it's an incredibly interesting time in healthcare. I think specifically in digital pharmacy where you have Capsule pioneering. That transition from 1- 1 1/2% online to bringing forward a million dollars online over time is going to be a really powerful trend. But I think across the board, you're going to see more companies in healthcare partner together -- particularly ones that have built the technology infrastructure that do that quickly and seamlessly and rapidly. So I’m just really excited for what's ahead. And obviously I'm biased, but I think Capsule is in a really interesting position to be able to catalyze a lot of different changes there.

SHIV GAGLANI:

Yeah. That could be an exciting journey to watch. With that Eric, thanks so much for taking the time to be on Raise the Line as well as, more importantly, the work that you're doing at Capsule to make a pharmacy that works for everyone.

ERIC KINARIWALA:

Thanks for having me.

SHIV GAGLANI:

And with that, I'm Shiv Gaglani, thank you to our audience for checking out today's show, and remember to do your part to flatten the curve and raise the line, since we're all in this together. Take care.