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A Healthy Start

The Challenge You’re an entrepreneur who sold his investors on developing a robotic technology that will revolutionize your industry, only …

The Challenge

You’re an entrepreneur who sold his investors on developing a robotic technology that will revolutionize your industry, only to discover, after investing four years and $15 million building a robot, that it doesn’t work.

The Context

A veteran of the drug-dispensing industry, Remedi Senior-Care CEO Michael Bronfein was confident that automation technology could dramatically advance the institutional drug dispensing and packaging business—a $16 billion industry still mired in labor-intensive manual operations. Traditional, institutional pharmacies employ fleets of people who fill batches of “bingo cards,” each containing 30 days of medication, which are distributed to nursing homes where nurses pop out and dispense the pills as they make their rounds. Bronfein’s idea involved replacing this manual process with a conveyor-style robot that would dispense meds in individual, plastic pouches containing daily, rather than monthly dosages, for each patient. The upside? Lower labor costs, greater dispensation accuracy and less wasted medication (about 17 percent of the drugs dispensed in 30-day bingo cards end up discarded, due to treatment changes or patients dying or being discharged).

The Hurdle

When his nascent company’s first robot proved problematic, Bronfein had to double down. Despite efforts to both build and buy the necessary technology, the resulting machine wasn’t up to par. Undeterred, Remedi hired a robotics company to fix it. “They came back and said, ‘This is a piece of junk, it will never work,’” recounts Bronfein, who was forced to go back to his investors and convince them to persevere. “I kept reminding everyone not to lose sight of the endgame, that the opportunity is so big that if it takes more time and money, that was okay. That was a full-time job.”

The Resolution

Ultimately, Remedi succeeded in building Paxit, an automated robotic system that packages, labels and conducts quality control on individual drug orders. “Fully deployed and commercialized, it eliminates about 15 percent of drug costs for our customers and has led to significant increase in margin for us,” says Bronfein, who adds that in addition to eliminating waste, the system offers improved accuracy—essential in a business where lives are at stake. “The accuracy of this robot has to be without question,” says Bronfein. “The standard of technology has to be so unimpeachable that, after a short period of time, it speaks for itself. And that’s what has happened. We put out 29 million doses with these robots over the last 27 months with zero errors. Not one error.”

Since its launch, the system also benefitted from regulatory policy changes and general economic conditions that gave customers the incentive to adopt the technology. “We knew that payers would continue to put pressure on providers to reduce the cost of service, but we were also fortunate in that the government has now mandated a 7 to 14 day drug dispensation cycle for Medicare Part D patients. Now, all the bingo-card operators are scrambling to figure that out.” In fact, the tailwinds are such that Remedi is in the happy position of having customers seek out its services. “We are winning new business every day,” says Bronfein.

The Endgame

Today, the company has revenues of $150 million and is on track to have five, fully robotic dispensing and distribution centers in operation by year-end, and it plans between four and six more in 2013. Remedi’s total cost per system implemented is approximately $6 million, with each system comprised of two robotic dispensers, accommodating between 9,000 and 10,000 residents per day. Ultimately, Bronfein intends to expand his market beyond nursing homes and institutional-care facilities to include the retail marketplace. “Any chronic-medication user would benefit from this system,” he asserts, noting that compliance with drug regimens and adverse drug interactions is a huge issue for seniors living independently. “We believe that by providing seniors with an easy-to-use system in their homes, they will be better equipped to comply with their doctor’s treatment, which will, in turn, reduce hospitalizations and related costs.

Meanwhile, Bronfein is on to the next project—a software product for nurses called Connexit that Remedi launched in January. It is an electronic, data-interchange system that enables nurses to manage medical records and order medication electronically, cutting down on administrative processes and paperwork. Remedi, which charges facilities per patient bed for the service, estimates the system can save a 100-bed facility approximately 80 nursing hours a month. “We calculate that after paying us the $6 fee per bed the average facility will save $36,000 a year in nursing-related costs,” says Bronfein. “And we eliminate one technician in our pharmacy for every client we connect to our tool, so it’s a win-win.”

The Lessons

From his tumultuous startup ride, Bronfein offers the following takeaways:

Don’t Bank on a Repeat Experience. Bronfein went into Remedi confident of repeating the success of his first venture, a pharmaceutical network called NeighborCare that he ultimately sold to a rival for $1.8 billion. “I thought I knew what I was doing, but I was a babe in the woods,” he says. “It was a great lesson in humility.” One of the biggest stumbling points was something called “failure modes and effects analysis”—a method of predicting the likelihood that a piece of equipment will fail in use. “In a well-built machine, you might have two or three points of failure. The one we initially built had 222,” says Bronfein, who advises CEOs spearheading new technology to “prototype everything.” The company went back to the drawing board and Bronfein came away with this wisdom: “Just because you’ve built one great company doesn’t mean you can build another, even if it’s in the same industry.”

Bulletproof Your Vision. To create a disruptive technology, you need a clear vision of the problem you intend to solve and hard data on the feasibility of that vision. “Make sure you’re not trying to make that data fit your assumption—that the data is empirically supportive of what you want to do and that the market opportunity you are driving toward is real,” says Bronfein, who notes that it’s all too easy to become too enamored with technology to view it objectively. “I remind people that vision without execution is a dream, but vision with execution is a market.”

Plan to be Surprised. “The path to real innovation is very circuitous,” adds Bronfein. “As sophisticated as you may feel your engineers to be, you are in uncharted waters. You will need to be able to adjust to a changing environment very quickly—and that usually takes both time and money. Double or triple your expectation of what it will cost or how long it will take.”

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.