Mobile-first pharmacy Capsule is planning to move beyond its base in New York City next year after landing $200 million in financing from investors.
The company is not disclosing which cities it is targeting, only that it plans to be operating in “several major cities” within the next 18 to 36 months, according to Eric Kinariwala, Capsule’s founder and CEO.
Since its launch in 2015, Capsule has grown to serve about 60,000 customers in New York City. Previously, it has garnered investments of $70 million. The company’s latest funding comes from venture capital firm TCV, as well as two of its existing investors, Thrive Capital and Glade Brook Capital.
“Building on our tremendous success in New York City, it’s time to start bringing a smarter, simpler, kinder pharmacy to the other 97 percent of Americans who live outside of the five boroughs,” Kinariwala said in a written response to questions. He declined to share the company’s revenue.
Some of the new funding will go to building out Capsule’s digital pharmacy platform, the company said.
In addition to its delivery service, Capsule operates a storefront pharmacy in New York’s Chelsea neighborhood. Pharmacies may also pop up in the cities where it expands.
“Most consumers love having a pharmacy on their phone and being able to chat, text or call a pharmacist any time,” Kinariwala said. “Our storefront pharmacies will provide the option to talk to our pharmacists in person or pick up medications whenever that is more convenient.”
Capsule faces competition from existing pharmacy operations, as well as other online purveyors, including Amazon-owned PillPack and NimbleRx, which builds app-based and online delivery services for independent pharmacies.
Delivery companies in general “are a great business model right now because everyone’s going so fast with their key priorities that many folks are willing to pay for convenience,” said Patrick Michael Plummer, a business professor who specializes in healthcare at Penn State Mont Alto, which is near Chambersburg, Pennsylvania. But newcomers in pharmacy have to convince people it is worth switching.
He said Capsule can expect to grow but is unlikely to overtake larger players in the market, becoming instead a potential acquisition target.
“That’s the goal of nearly every startup,” he added.
Capsule’s Kinariwala has argued that existing pharmacy models are not working for consumers, due to long wait times, lack of price transparency and inability to deliver private, expert advice to patients. He started Capsule shortly after his own frustrating experience with getting a prescription filled in New York.
“Consumers demand frictionless experiences in all aspects of life and the pharmacy and healthcare are no longer an exception,” he said in an email.
The company estimates that online sales account for between 1 percent and 1.5 percent of the annual $350 billion in retail pharmacy sales overall, with most customers still picking up prescriptions at brick-and-mortar pharmacies. But online is growing quickly, it said.
“Capsule’s exponential growth in New York is clear evidence of shifting consumer preferences,” Kinariwala said.
Capsule’s model is unique, he cited, in that it allows patients to schedule free, same-day delivery within a two-hour window, a service the company plans to replicate in its new markets.
Capsule also works with doctors and health systems. The company’s software allows doctors to set up refill preferences and pick alternative medications if a patient’s insurer does not cover their first choices. And it gives doctors greater visibility into patient behavior, helping to increase the likelihood that patients get their prescriptions filled.
“While other pharmacies have added delivery on to the existing in-store experience, Capsule’s full-service digital platform is completely redesigning the pharmacy experience from the ground up,” said Kinariwala.
In announcing its latest investment, Capsule also indicated it has ambitions beyond delivery, saying it planned “to build the hub of healthcare” by leveraging its technology, its engagement with customers and the high-trust, high-frequency nature of pharmacy. But Kinariwala said the company was not ready to share details.
Conventional pharmacies have expanded to include in-store clinics, while CVS Pharmacy parent CVS Health now owns a health insurance company, Aetna.
Photo: Stuart Ritchie, Getty Images