The PillPack story fits the classic startup stereotype: young founders (one with a scraggly beard!), industrial chic office space in Somerville, and the drive to disrupt a dusty business — in this case, the neighborhood pharmacy.
And in June, the company hit the classic startup jackpot: an acquisition by Amazon for about $1 billion.
But while most of the coverage of the company focused on those stereotypes — CEO TJ Parker landed on Forbes Magazine’s “30 Under 30” list of promising entrepreneurs a few years back — it missed one key player in PillPack’s success.
That would be Lenny Parker, the CEO’s dad. Age: 62. Anyone working on a “60 Over 60” list?
Let’s rewind to the summer of 2012. TJ Parker had graduated from the Massachusetts College of Pharmacy and Health Sciences, and taken a job with his father’s company, Northeast Pharmacy Services in Concord, N.H. “It was not the life trajectory I was planning on,” Parker told me last year. NPS had about 25 employees, and was fulfilling prescriptions for about a hundred assisted living facilities and group homes around the state. It was one of the biggest pharmacies in New Hampshire, Parker said, but it was a family-owned business that wasn’t likely to “scale,” or grow into a major player in the industry.
But NPS was using Japanese-made equipment that stored pills and tablets, and could automatically sort and package up doses of medication for each patient into a separate plastic envelope for morning, noon, and night medication times. While NPS was focused on serving facilities that housed dozens or hundreds of patients, TJ Parker envisioned that a similar service might be convenient for individual consumers, leveraging similar packaging equipment.
In the fall of 2012, he and Elliot Cohen, a business school student at MIT, pitched the idea as part of a “hackathon,” an event where teams of students and entrepreneurs were building prototypes that might solve problems in the health care industry. The problem PillPack was focused was medication adherence — making sure patients don’t miss or skip doses. They won first place, and the following year were accepted into the Techstars Boston accelerator program, designed to help fledgling companies hone their offerings and attract investors.
PillPack was already starting to do the latter. Part of the startup’s fund-raising success was tied to Cohen — he had landed a summer internship at Founder Collective, a Cambridge venture capital firm, and had also been a teaching assistant for an MIT course on health care entrepreneurship taught by Zen Chu, an entrepreneur and angel investor. Chu and David Frankel, a partner at Founder Collective, put the first money into PillPack.
Founder Collective had also been an early investor in the ride-sharing service Uber. But not all of the investors were initially convinced about PillPack’s potential. Frankel says that part of what eventually persuaded them was “the edge that TJ articulated to us. He said, ‘We won’t need to invest in robots; we’re going to use the robots that my dad uses for his eldercare business, use that same [individual dose] packaging, and try this thing out.’” In other words, having access to the automated equipment would allow them to do some of the early work of prototyping a new kind of prescription service for consumers more easily, without having to build their own infrastructure.
Katie Rae, former managing director of Techstars Boston, adds that “all of that real knowledge of the equipment and watching his father run [NPS], and TJ being involved, gave him the confidence to say, ‘We could really take what my dad had built for one specific niche — nursing homes — and scale that to millions of consumers.’ ” PillPack eventually designed a clean white dispenser box that would sit on a bathroom counter and let the consumer tear off each plastic envelope from a roll tucked inside — each envelope labeled with its contents and the time the medications were supposed to be taken.
By the time PillPack finished the three-month-long Techstars program in mid-2013, the startup had commitments from investors for about $4 million. The company began to build its own pharmacy infrastructure in Manchester later that year. “I was doing IKEA trips to get the cabinetry,” TJ Parker said. “We would spend 12 hour days putting everything together in the facility.” By the time PillPack launched in February 2014, it had obtained licenses to operate in 31 states. (While the company’s pharmacists filled prescriptions in Manchester, with help from the automated dispensing and packaging gear, the software developers and designers who created PillPack’s website, mobile app, and fulfillment software worked in a Somerville office.)
“As this thing looked like it had legs,” says Frankel, the venture capitalist, Lenny Parker decided to join PillPack as the startup’s vice president of pharmacy. Lenny Parker sold his stake in NPS to a partner, and began working out of PillPack’s Manchester office, helping the company build its relationships with the insurance companies that pay for prescription drugs, as well as to ensure the company adhered to state regulations as it continued to expand, eventually serving customers in 49 states — all but Hawaii.
PillPack employees didn’t feel it was strange that the CEO’s dad worked for the company, says one former PillPack-er. “We all knew that TJ grew up working for his dad, so it had kind of a good vibe about it,” says this ex-employee. “The company really benefited from Lenny’s deep knowledge of pharmacy.”
By 2017, PillPack had hit $100 million in revenue, and it had grown to about 600 employees. Earlier this year, the company became the focus of a bidding war between Walmart and Amazon, two retail giants that considered prescription medicine a major growth area for their online storefronts. Walmart may have moved too slowly — on June 28, Amazon announced it would purchase PillPack. Amazon, says Chu, “is the most exciting change agent in health care right now.” The acquisition — along with the recent news that Amazon, JP Morgan Chase, and Berkshire Hathaway will build a new joint venture here focused on providing health care for their employees — makes Boston a very important pin on the map for the company.
The acquisition won’t be officially wrapped until mid-August. Concern about how any comments might affect a billion-dollar deal may be one reason why neither TJ Parker nor Lenny Parker was willing to speak with me for this article.
The son, says David Frankel, was “the kid who sees a family business and explodes it into something else.” TJ Parker and Elliot Cohen will each pocket roughly $100 million from the sale of the company they built over five fast years.
The dad is committed to staying with PillPack for a year-and-a-half after the Amazon acquisition is completed. But after that, Frankel says, Lenny Parker “will retire for life because of this deal.”
Not the stereotypical startup story — but certainly one with a happy ending.Scott Kirsner can be reached at email@example.com. Follow him on Twitter @ScottKirsner and on betaboston.com.