Amazon Pharmacy not likely to disrupt drug fulfillment

Amazon Pharmacy not likely to disrupt drug fulfillment

Amazon customers in the U.S. can get prescriptions delivered to their home and receive up to an 80% discount when paying without insurance, the e-commerce giant announced Tuesday in its latest push into the healthcare industry.Amazon Prime members across 45 states will have access to unlimited, free two-day deliveries and can compare prices across 50,000 pharmacies. They can also save up to 80% on generic drugs and 40% off branded products when paying without insurance, which is administered by Evernorth subsidiary Inside Rx. While Amazon Pharmacy could boost convenience and transparency, industry observers didn’t expect it to disrupt the sector. The service will put additional pressure on large pharmacy chains and distributors as well as independent pharmacies, and will likely drive down costs and spur more competitive offerings. But it will remain to be seen whether Amazon Pharmacy can fill the need for high-touch patients managing chronic diseases and multiple medications, industry observers said. “I think you’ll see CVS and Walgreens take further steps in pursuit of improving convenience—more home delivery with shorter turnaround times in more markets,” said Stephen Tanal, a senior research analyst at SVB Leerink. If Amazon can leverage the same logistical infrastructure and “attach” prescriptions to orders of general merchandise, Amazon Pharmacy could be analogous to grocers adding pharmacies to their stores, he said.”I think this symbolizes Amazon’s desires to become a force in healthcare,” said Tanal, although the expectations have been that pharmacy was the most logical place to start.This could push small retail pharmacies to merge to gain economies of scale, understanding that they would not be the lowest-cost offering but differentiate themselves through good customer service, particularly for patients with multiple underlying conditions and medications, said Jamie Kowalski, a supply chain consultant. “I am a little concerned, because I have a soft spot for local pharmacies, that this is going to kill them,” he said. “We have to remember that we are dealing with people here—we could get slick and efficient, but if we degenerate that aspect of the pharmacy system, then we have made a mistake.”Investors took the news seriously. Rite Aid’s stock plummeted more than 16% Tuesday, while Rite Aid was off 9%, CVS 8%, Cardinal Health 6%, McKesson 5%, AmerisourceBergen 3% and GoodRx 22%. Amazon’s foray into the estimated $300 billion retail pharmacy business represents its latest healthcare venture. Amazon paid around $1 billion for PillPack, which organizes medication to improve adherence. It has piloted virtual services and primary-care clinics for its employees and teamed up with Berkshire Hathaway and JPMorgan Chase to improve health benefits for their employees. Amazon has also expanded its commodity medical supply product line through its Amazon Business platform as well as broader, integrated supply chain services for some small hospitals. But most of the growth is in the specialty pharmacy arena, which is likely outside of Amazon’s wheelhouse, said Lawton Robert Burns, a healthcare management professor at the University of Pennsylvania Wharton School.Amazon is entering an already competitive business and one that is declining to some extent, he said.”Is that going to shake up the industry? No, it is just putting the existing players under greater stress, mostly psychologically,” Burns said. “Curb your enthusiasm.”CVS and other large chains have grown their specialty pharmaceutical portfolios, which isn’t a likely target for Amazon, said Brian Romig, a director at Guidehouse who leads its pharmacy practice. While Amazon’s price comparison tools and broad supplier base will likely boost transparency and competition, it is also less likely compete in the realm of medication management for complex patients, he said. “This is probably better for relatively healthy patients who can easily compare prices and order one prescription,” Romig said. Amazon said customers can compare their insurance co-pay, the price without insurance or savings through Prime for branded and generic drugs in different forms or dosages. They will also have 24/7 access to pharmacists, executives said. “We designed Amazon Pharmacy to put customers first – bringing Amazon’s customer obsession to an industry that can be inconvenient and confusing,” TJ Parker, vice president of Amazon Pharmacy, said in prepared remarks. “We work hard behind the scenes to handle complications seamlessly so anyone who needs a prescription can understand their options, place their order for the lowest available price, and have their medication delivered quickly.”

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