Getting online in the end

Getting online in the end

Daniel Lee believes his online healthcare business Pharmacy2U is going to benefit hugely from the Government’s introduction of new media into the NHS, as BQ reports.

There must be few interviewees who would still make it into the interview the day after their wife has given birth to twins prematurely.

But Daniel Lee, the 42-year old managing director of Leeds-based online pharmacy Pharmacy2U, is one of them.

Brushing off all suggestions from this interviewer that perhaps we should arrange for another time, he insists on going ahead, and is the height of politeness throughout.

That is a measure of the man, and of how focused he is on his business. After all, his company, which currently turns over £21m, has been labelled as one to watch many times before, but there was a time when, thanks to devoting much time to a new Labour project that had more or less stalled, it was, he admits, touch and go whether it would survive.

The fact that it did, which he puts down to his management team, is probably just as much down to his own tenacity and ability to hunker down and concentrate on the job in hand.

But more of that later. The idea of an online pharmacy wasn’t one that just sprung into his head one day, even if the company was launched at the height of the dotcom boom in the late 1990s.

Pharmacy is actually in the Lee family’s blood: his father ran a chain of pharmacies in east Leeds which he sold just as Pharmacy2U was starting up.

But Daniel felt he could really achieve something more.

“Doing something online was always the basis of the business,” he says. “We did have a family retail pharmacy in Leeds, but I wasn’t really enjoying working in a retail aspect, so I did an MBA Durham which I was lucky enough to have sponsored by the NHS.

“I was the only pharmacist on the course, and it made me really understand where pharmacy fitted into the structure. I am not sure many of my course mates, did, however. Many of the people on the course were chief executives of NHS Trusts. They didn’t value what pharmacists brought to the NHS.”

He came away determined to do something better for his family profession, partly because of what he had seen in countries like France and Italy, where the pharmacy lobby is stronger and pharmacists are valued much more highly as a result.

In particular he thought he could focus on the market for repeat prescriptions “Prescription pharmacy is a £12bn market,” he says, “but 80% of that is for repeat prescriptions. You have 800 million bits of paper flying around the system, and all these people chasing that. It’s hugely inefficient. But the technology was around to improve things, so I thought maybe we could harness that to do things differently."

In his ideal world, he saw the internet taking over much of the repeat prescription work, leaving retail pharmacists free to do what they should be best at anyway, which is providing added value services to people with acute needs.

The company has even done research asking people how much they value having face-to-face contact with their pharmacist.

“We have never had people say that they do,” he says. But he insists that that is not necessarily a bad sign for pharmacists – not, at least, when you consider that Pharmacy2U’s customers are largely people who have chronic conditions who will need ongoing medication.

“Regular pharmacists by contrast are meeting patients in a different setting – people who are generally speaking well. People who are unwell like the ones we deal with need delivery services.”

That was the kind of ideal he was after. But as any good entrepreneur knows, the ideal is often very far from reality, especially in monolithic organisations such as the NHS. When he first started selling medicines online, the first hurdle he had to overcome was the apparent illegality of what he was doing.

“Our lawyers said it was illegal and the advice we got was not to do it, but we felt law needed to change.”

Nowadays of course with spam emails selling all sorts of dubious medicines over the net, the need for some kind of regulation seems perfectly valid.

But Lee says the regulations they were up against back then were nothing to do with that. They dated from the 1960s, and had, he says, really only been introduced because mail order pharmacies had not been part of the medical apparatus then.

“Yet in other markets mail order pharmacy is quite prominent,” he says. “In Germany and USA 15 to 20% of the market is mail order. And the reason why is obvious. If you look to automate and mechanise you can remove some of the costs involved in prescribing, and move the money released to other areas where you can benefit.”

He decided initially to concentrate on selling what are known as “pharmacy only” medicines – medicines you can buy over the counter without needing a prescription, but which are in stronger doses or larger pack sizes than what you might find in a convenience store.

“We started selling those,” he says, “but were ensuring we had appropriate questions, to make sure we were trading safely. I knew we were onto something because we had three orders first: one was from Glaxo Smithkline, one was from Vicks, and one was from the Royal Pharmaceutical Society.

"They were testing us out, and were very keen to find out that our procedures were safe and effective.”

In fact, having established a degree of credibility in the market Pharmacy2U worked with these and other organisations to bring about change, and in the year 2000 new laws were introduced to allow many more types of medicine to be dispensed online.

“Pharmacy2U was seen as innovative catalyst for change,” he says. Not just by the industry, either.

By the year 2000, of course, new Labour had been in power for three years, and one of new prime minster Tony Blair’s pet projects was something called Connecting for Health, a project that aimed to get all hospitals and GP’s surgeries connected on one huge electronic superhighway so that, for example, if you were taken ill while on holiday in Cornwall the GP there would be able to look up and see everything about you from your regular GP and hospital back in Yorkshire.

Pharmacy and the electronic dispensing of prescriptions was a key part of this, and the Government saw Pharmacy2U very much company itself, of course, was keen to get an entry into the potentially very lucrative NHS prescription market.

There was a pilot for 18 months with 100 surgeries, run in conjunction with EMIS, another Leeds company that supplies software systems and databases for GP’s surgeries.

“And at the end of that the Government decided it was technically viable, and said they were going to deploy this system across all GP surgeries by 2005.” Lee couldn’t wait to see what happened.

Except he was kept waiting. And waiting. That was 2005, it is now 2012, and still the system has not been rolled out fully. In truth, the project fell victim to the huge delays that much of Connecting for Health faced, delays that led many in the industry to brand it a failure.

In particular, there was the question of which IT system to use. The Labour Government and the experts it had appointed to run Connecting for Health initially insisted on everyone running the same system, and went about doing so in a very top down, heavy handed way.

“It was a complete bureaucracy, not just over prescriptions, but about everything about how they thought a new, centralised NHS should run in the digital 21st century,” says Lee.

“Only now are they allowing market forces to develop. Originally they wanted to contract with third party companies to put in their own systems, and it is only after a lot of lobbying that it has been agreed that GPs can now decide for themselves rather than being told what to put in.”

These arguments inevitably set back the time when Pharmacy2U would have any involvement in the action. Lee admits that it was a shock when he realised that a project that was very much in line with what his vision was all about and which he had resourced up for was not going to deliver.

“When we first heard that the project wasn’t going to be rolled out as we were led to believe it was a serious time,” he says.

“We had outside investors who began to think that the company wasn’t going to realise its ambition. There was even one week when we seriously looked at salvaging what we could of the business.”

He got through this time, he says, by looking elsewhere. “I was very lucky,” he says, “because by that time I had built up a strong management team. In 2000 I had appointed as executive director a man called Julian Harrison who had come to us from Andersen Consulting. With him on board we managed to be reactive, and we looked at private medicine. We could grow the market in electronic prescriptions pretty easily there, because the law that was stopping us doing so, the law that centred around electronic signature, was only an issue within the NHS market.”

As a result, Pharmacy2U’s business within the private medicine sector is now not far off what he imagined a web pharmacy would be like when he first started.

With many of the private practices you can quite literally log on, describe what your symptoms are and have most of your dealings with the practice, including the delivery of your prescriptions, done online.

“There are certain treatment areas that the General Medical Council have advised shouldn’t be done online, such as diagnosing obesity,” he says.

“But we are very close to a company that is going to launch general consultations online.” Nevertheless, he says he always wanted Pharmacy2U to be a free at the point of access service operating within the NHS as well as outside.

“I always wanted there to be no added cost to the patient,” he says. “The subsidy and the delivery charge should come out of Pharmacy2U’s margins.”

And this year, he feels, finally, Government is responding to the online challenge, particularly through its white papers. The white paper he has in mind is one that covered greater used of new media within the NHS.

“That white paper says: ‘Come on guys, we have got to harness power of new media.’ It is only so frustrating that it has come out only now, after the Labour Government went for a central bureaucratic approach which is shown to have failed.”

But he is just as enamoured of the far more controversial white paper and reforms Health Secretary Andrew Lansley is introducing, which are designed to put more decision making power in the hands of GPs.

“I am supportive of bringing power back to GPs,” he says. “Of course, it won’t just be GPs now, but also clinician groups. But the power of purchasing should lie with them.

“Ever since GP fundholding was introduced in the 1980s, we have been gearing up for this kind of approach.” The company is working once again with EMIS on trialling electronic prescriptions through over 300 GP surgeries who use EMIS’s systems.

“That interface with EMIS gives us a whole level of patient care that they don’t get currently,” he says.

EMIS’s managing director Sean Riddell has also joined the board as a non-executive. There is expansion too. The company is currently investing £3m in a new fully automated warehouse.

“That will allow us to grow to about 15 times our current volumes,” he says.

“It is the most exciting time since 2005.” And a real sign that he means business is the appointment this month of Andy Hornby, former chief executive of HBOS, as a non-executive director. Hornby, of course, did not leave HBOS entirely unblemished – he had to apologise to MPs for allowing the bank to get into the situation it did – and as a result he might not be everybody’s favourite business person, particularly in HBOS’s home ground of Yorkshire.

So the fact that Lee is taking him on says something. He certainly has no qualms.

“We are actually very lucky to have someone of Andy’s quality,” he says. “After all, he was managing director of George at Asda before he went to HBOS, and obviously Boots weren’t too bothered about what he had done, because he joined them as chief executive after HBOS.”

Lee certainly has great hopes for Pharmacy2U this year, as it makes more inroads into the NHS market.

“It’s a £10bn market,” he says, “and I would be very happy if we got to even 1 to 2% of that at the moment. It is a significantly large market that has never been tapped into before by mail order. Of course, mail order and the internet isn’t for everybody, but it is for a certain choice of patients. And they are the ones we are aiming to go after.”