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  • 04.15.16

In health care, startups have to play by the rules (even if the rules suck)

Yesterday, mail-order pharmacy startup PillPack was told that it would be dropped by Express Scripts Holding, a pharmacy benefits manager. Express Scripts’s team claims that PillPack misrepresented itself; PillPack’s founder hit back by rallying angry customers to take on a “monopoly.” 

It’s a classic “he said, she said” drama, but one thing is clear: Unless PillPack’s team can convince Express Scripts to change its mind, it will lose a third of its patients by the end of the month. 

I turned to Steve Kraus, an investor at Bessemer Venture Partners who has closely followed the space, for some perspective. He agrees that Express Scripts has a “very powerful position” in the market. But Kraus made an important point that has been missed in all the brouhaha: 

“If you look at its numbers (of customers), PillPack is not a direct threat to a behemoth like Express Scripts. It could be, but today it isn’t. Startups that don’t have the size and scale in many areas of health care have to play by the rules — even if the rules don’t make sense.”

Health startups are so often lauded for their “disruptive” power. But to make a dent, so many founders are required to play within the boundaries of the existing structure, whether they like it or not. In health care, the players with the aforementioned size and scale have all the leverage. CF