Capsule, a digital pharmacy, brings same-day delivery to Minneapolis

Capsule, a New York-based online pharmacy that promises same-day free delivery, has opened in the North Loop, making Minneapolis and the Twin Cities its first expansion territory outside of Manhattan.

Capsule, in seeking to be the paramount online disrupter in the emerging digital-pharmacy industry, has received notice for raising about $250 million in capital over several years, including $200 million last fall.

The company is the brainchild of CEO Eric Kinariwala, a Stanford MBA from Michigan, who worked in private-equity investments and who had a bad experience at a chain-story pharmacy in New York about six years ago that got him thinking.

After an hourlong wait to fill an antibiotic prescription to treat a sinus infection in the basement of a Duane Reade drugstore on the lower east side of Manhattan, Kinariwala finally learned from the next-up pharmacist that he was out of stock.

"I wasted that time and no medication and that may have been the one thing they should have had in stock," recalled Kinariwala. "We all have those moments. It made me curious.

"I just started digging and poking around and found that the experience is not all that uncommon. It's not just the consumer, who kind of becomes the pinball. It's the doctor and the insurance company. And the experience can lead to bad health outcomes."

According to the National Association of Chain Drug Stores, its industry provides about three-quarters of doctor-written prescriptions in the United States. But it's not a full-proof system, according to a telling article several years ago in the industry's magazine that was compiled from a variety of sources.

In short, there are a lot of breakdowns. For example, it was estimated that a third or more of prescriptions written are not relayed to a pharmacy, up to 50% are not picked up by patients, up to 75% of medications are not taken properly and around 80% of prescriptions are not refilled as prescribed. That's a lot of miscues in a $475 billion-annual industry.

Certainly, not all of this is the fault of the pharmacy or busy pharmacists at the local Walgreens or CVS.

After ample research, Kinariwala launched Capsule, arguably the most prominent of several "digital pharmacies."

Capsule focuses on same-day prescriptions and delivery by employees in the five New York City boroughs.

Kinariwala, 37, declined to quantify sales or financial performance other than to say that Capsule is the fastest-growing digital pharmacy with 300% revenue growth last year. He claimed it is outperforming the traditional prescription industry by 50% in terms of getting the right drugs in the hands of patients promptly and stressing rigorous compliance that leads to improved medical outcomes.

"I think of Capsule as more of a technology platform than a store," said Kinariwala, who employs about 800, including pharmacists, IT workers and logistics managers, customer-service folks, drivers and bicycle delivery people.

"We have good pay plus worker compensation benefits."

A recent article in online publication MedPage rapped Capsule with a few crummy customer experiences in New York.

Kinariwala responded that the company tracked down each of those people, got things resolved and also noted that it has an impressive 5,000-plus five-star reviews on the Apple app store.

"There have been times when we missed the mark and we try to make it right," he said. "There are opportunities for us to do better."

Capsule launched its soon-to-be-remodeled Minneapolis store this spring in the North Loop, dense with small businesses and residents. But its drivers deliver anywhere within the Interstate 494-694 loop around Minneapolis, St. Paul and first-ring suburbs.

The general manager is Michael Graham, 27, an Edina native who worked in health care-related investment banking and for Capsule in New York. The North Loop resembles the density of parts of Manhattan, he said.

Graham said the key ingredient, beyond ensured delivery, is that Capsule does the legwork among and between physicians, insurers and pharmacists and drugmakers to always be in stock, thanks to its predictive software and technology, with the right drugs at the best prices, consistent copays and automatic application of industry coupons and discounts.

The company said Capsule's online app makes managing and filling prescriptions easy after an online customer-registration process that takes less than a minute. Pharmacists are available for consultation round the clock.

Capsule's reputation for focus and innovation preceded it in the Twin Cities.

"The Medical Alley community excitedly welcomes Capsule to its ever-growing pool of innovators, trailblazers and resources that corroboratively tackle the world's biggest health care challenges," Shaye Mandle, chief executive of the Medical Alley trade group, said in a statement.