Top executives from the pharmaceutical industry and direct-to-consumer marketing are teaming up with leading dermatologists and manufacturers of skin-care products to create a new hybrid business model that is part brick-and-mortar, part Internet-based and completely in tune with the times. RegimenMD LLC aims to be “the Amazon of dermatology.” That’s the consumer-friendly way of describing the business. Pharma industry insiders will recognize the model as kin to distribution powerhouses Cardinal Health Inc. and McKesson Corp.
Less than a year old, this start-up has as its chairman and CEO and one of its co-founders Les Riley, a senior exec at Johnson & Johnson for nearly 20 years, who served as president of the dermatological division of J&J’s Ortho Pharmaceutical. Riley left J&J to start NeoStrata Co. Inc., the first company to commercialize alpha hydroxy acid for consumer skin care. He was then president of Advanced Polymer Systems (APS), which put Retin A in a microsponge and won an extra 17 years of patent protection for the molecule. It is now in over 200 products, thanks to the licensing deal Riley orchestrated with J&J. Cardinal Health acquired APS on condition that Riley stay for a few years to build its skin-care capsule business, which he did. In business for himself since 2002, Riley says, “Corporate America is for other people now, not me.”
Riley’s success story in dermatology, and that of other company founders equally accomplished in other industries, is part of the energy powering RegimenMD. The company says it can help dermatologists grow the bottom line of their businesses with truly minimal effort on the doctors’ part. RegimenMD will manage for the doctor the transactional side of the patient-consumer relationship, by serving as the behind-the-scenes connector for doctors, patients and product manufacturers.
The old way that dermatologists worked was to give patients some verbal information about their condition, perhaps some pamphlets, and a prescription to take to their pharmacy. But people lose slips of paper and forget the details of what their doctor told them. These days, in addition to writing prescriptions for drugs, dermatologists are increasingly asked to recommend skin-care products. Many docs maintain an inventory of non-prescription products they like, such as sunscreens and scrubs and moisturizers, which they buy from manufacturers wholesale and mark up. If the products work and a patient likes them, that may be the last the doctor sees of that person for a while. Patients know they can go to the Internet and probably order the same product cheaper, and get it sent directly to them instead of having to go back to the doctor.
RegimenMD is creating a new distribution channel designed to help doctors maintain a professional relationship with their patients, and also establish a commercial relationship whereby doctors earn a percentage on the skin-care products they prescribe. But wait, there’s more! Doctors that ally with RegimenMD will also receive a percentage of other skin-care (and hair and nail-care) products that patients may order through an Internet portal branded as RegimenPro.
Patients who have seen a doctor can sign in and see a screen much like an Amazon account, with their doctor’s image and contact information, featuring products the doctor has recommended specifically for that person, with the doctor’s notes on how and why these products should be used. The site will feature products the doctor has chosen as “Doctor’s Favorites,” and allow patients to see many more, if they want to. It also provides links to educational articles and videos: some showcase top doctors, some spotlight celebrities who say they use a particular product, others focus on actual patients with compelling before and after photos, who talk about their experience with a product.
“We want to control the consumers. Continuity is everything in this business,” Riley declares, adding, “To get the doctor the first, second and third prescription literally doubles their business.” Riley points out that dermatology patients are highly “qualified” consumers; they have paid a fee to get the information (the prescription) that has brought them to the site. Any product orders that a customer places are processed by RegimenMD, and forwarded to the manufacturer, which ships directly to the consumer in a matter of days. Doctors don’t have to store and manage any inventory in their offices to earn a commission on sales.
Already 20 major manufacturers have agreed to work with RegimenMD including SkinMedica Inc., NeoStrata, Jan Marini Skin Research Inc., Skinceuticals, MDRejuvena Inc., and Nuvesse Skin Therapies. “The skin-care market is clearly changing. Doctors know it and manufacturers do too,” says Patricia Farris, MD, a respected, practicing dermatologist who frequently consults for companies like L’Oreal SA, Allergan PLC and large dispensing companies. Herself one of RegimenMD’s co-founders, she explains that manufacturers are getting involved with the start-up, in part because they recognize that there is an awful lot of counterfeit product being sold via the Internet these days. Manufacturers that agree to ship directly to consumers after receiving an order forwarded by RegimenMD can guarantee that the product they are shipping is both legitimate and fresh.
RegimenMD’s hybrid model brings manufacturers business that otherwise drifts elsewhere, and may even damage their reputation, Farris points out. Counterfeiters are just part of the problem. Growing numbers of discount and “odd lot” stores deal with random distributors that may “store genuine products who knows where.” A month or even days in a baking-hot warehouse can destroy the efficacy of delicate creams and lotions. It’s not just knock-off suppliers siphoning business from manufacturers: major retail stores like Target stock product in physical stores, but they also compete with manufacturers by selling to consumers through websites they own, such as Target’s DermStore and LovelySkin.
Dermatologists and plastic surgeons are the first doctors RegimenMD is reaching out to, but the model is meant to expand. “This model works in any specialty. Think about that,” Riley instructs. He notes that ob-gyns are increasingly selling specialty skin-care products to their patients, “because they need the extra income” due to reduced reimbursement rates. Salons and spas increasingly employ licensed professionals; RegimenMD can help them connect clients with medical-grade, non-prescription products that don’t have to be kept as inventory. “It’s a great opportunity for institutions that now make zero on products they recommend, because they don’t stock inventory. We can manage that for them,” Riley asserts. Indeed, he says RegimenMD has a few universities participating the beta-testing phase it is in now. The start-up expects to sign up 500 doctor-customers in the first six months, 1,500 in year two and 3,000 in year three. The founders are planning to grow the business without its own sales reps or trainers, although it will train manufacturers’ employees how to set up the RegimenMD system in doctors’ offices. “Some are very interested in that, some not at all,” Riley notes. He says founders and investors, all high-level executives respected within their industries, plan to man booths at dermatology association meetings and sell direct.
“It’s a whole new market,” says Bill Barlow, a direct-marketing maven who is one of the co-founders of the company. One of Barlow’s roles for the firm is to create educational articles and videos for the website, leveraging production facilities and expertise he already has. “We are expert at maintaining relationships with the customer,” Barlow declares. RegimenMD will serve three customers: manufacturers, doctors (and other professionally qualified recommenders) and patient-consumers, in a way that no company has done before.
By Deborah Erickson