Last week Amazon announced the launch of Amazon Pharmacy, a move industry watchers have long been anticipating that has some bracing for big waves and others doubting its disruptive capabilities.
The retail giant first entered the pharmacy business in 2018 with their acquisition of PillPack, a small online pharmacy designed for customers with chronic conditions and multiple prescriptions. The acquisition set Amazon up with a functional mail pharmacy and the opportunity to disrupt the cash-pay prescription business.
Amazon Pharmacy operates as a home delivery pharmacy, allowing customers to conveniently purchase prescription medications through their online store just like you would their other merchandise – a popular perk in the current pandemic-driven climate. Additionally, Amazon Prime members are able to receive free two-day delivery and up to 80% savings when paying without insurance.
It comes as no surprise that Amazon’s announcement largely impacted drugstore chain shares like CVS Health, Walgreens Boots Alliance and Rite Aid. A Cowen & Co. survey in September found that nearly three-fifths of Amazon Prime members said they would consider having their prescriptions delivered by Amazon, and the number of households with a Prime membership rose to a record 70 million in the third quarter.
Amazon’s focus on price transparency, convenience, a completely digital experience and quick delivery all help differentiate them in the market. In an age where “consumers are more willing than ever to order groceries online, digital education is on the rise, and there is rising acceptance of digital medical offerings,” said Morgan Stanley analyst, Brian Nowak, “these macro behavioral changes increase the likelihood that Amazon’s pharmacy product could gain traction.”
So, why are some industry experts left unimpressed?
Some claim copycat syndrome, believing Amazon is offering a discount card model similar to what’s offered by rival services like GoodRx, whose stock dropped nearly 23% in the wake of the announcement. Others feel Amazon has opted merely to join the drug channel, operating on the backbone of PillPack, rather than fundamentally changing it.
Phil Baker, pharmacist and founder of Good Shepard Pharmacy, was left feeling disappointed with the Amazon Pharmacy launch. “I’d hoped that Amazon would enter the pharmacy space with disruptive payment models and economies of scale which would [not only] make prescriptions more affordable for uninsured Americans but give employers an alternative to the PBM model. Instead, they’ve chosen a model centered on PBM endorsement, which perpetuates the status quo.”
Despite being backed by a strong brand, Amazon Pharmacy faces significant challenges in the pharmacy industry.
Reversing the current decline of mail pharmacy/mail dispensing to gain a substantial share
Developing a more significant cost advantage over other pharmacies
Competing profitably with payer-owned specialty pharmacies and their personalized, complex patient services
So, while their initial pharmacy industry play may feel to some like a missed opportunity, Amazon remains a retail force and the true impact of Amazon Pharmacy has yet to be seen.
