Can Amazon change the pharmacy landscape?

Industry experts are eyeing Amazon’s exploration of possible entry into the online pharmacy market.

MSN reported that Amazon is hiring a business lead to determine how the company can break into the pharmacy market.

Geraty

Amazon is skilled and experienced in disrupting traditional approaches, according to Ron Geraty, MD, CEO of AxisPoint Health. "Amazon will be careful to decide how to enter the market-whether selling drugs directly through consumers by cutting out the traditional distributors or 'middle men' who demand rebates and price adjustments based on 'control' or by selling through other methods, we can be confident that tradition will be broken," says Geraty.

"[Amazon CEO] Jeff Bezos of Amazon has proven he thinks different," Geraty continues. "He is patient, disciplined, has demonstrated he can break up current practices. The entire pharmaceutical/PBM/pharmacy system of collusion on pharmacy pricing needs to be disrupted. The implications for all of medicine is significant. Healthcare, in general, does not follow market forces. Is Amazon indicating it will take this bigger issue on by entering the pharmaceutical industry?"

Sanginiti

Amazon's foray into the online market can mean two things, according to Joseph Sanginiti, president and CEO of FamilyWize, an organization that advocates and negotiates for deep discounts on prescription drugs.

“First of all, it could mean more transparency when it comes to prescription medications,” says Sanginiti. “Secondly it will challenge the PBM industry on the issue of transparency and its mail prescription services.” 

For Amazon, Sanginiti believes this is really about the mail delivery service option for prescriptions. “This will most likely change the game and start a new trend, just like Amazon did when they entered the retail market,” he says. “Prescriptions will not necessarily be sold at a cheaper or wholesale cost. It’s more about the convenience, affordability, and the infrastructure of offering consumers the possibility of having their prescriptions delivered. It’s still a very early stage, so a lot remains to be seen.”

If Amazon enters the market they will enhance the trend of transparency and mail delivery service tremendously, according to Sanginiti.

Next: No surprise

“In my opinion, the fact that Amazon is considering entering the game at this time is no surprise to us. Amazon, like the rest of us, realizes that people need access to their medications, at an affordable price, as soon as possible,” Sanginiti says.

Amazon’s exploration of possible entry into the online pharmacy market is kind of like déjà vu all over again, as the company was a part owner of drugstore.com, which retail pharmacy giant Walgreens shut down last September, primarily due to branding issues, i.e., the Walgreens brand versus the drugstore.com brand, says Ken Perez, vice president of healthcare policy, Omnicell, Inc., Mountain View, Calif.

“While Amazon most likely won’t have to deal with a branding issue, it will be subject to regulatory requirements, a complex industry with well-established players-some of which will be competitors, and consumer experience expectations,” Perez says.

Perez

Almost all states require a pharmacy that sells drugs in the state to be licensed with that state, so Amazon will need to secure licenses from all the state boards of pharmacy in order to do business nationwide, according to Perez.

“Amazon will have to work with existing pharmacy benefit managers and/or develop its own PBM, as it is building for its own employees,” he says. “The latter could be tricky, since the nation’s second-largest PBM, CVS Caremark, is a subsidiary with CVS Health, which also owns CVS Pharmacy, an online and retail pharmacy competitor of Amazon.”

The ultimate test

Beyond the regulatory and competitive issues, the ultimate test for Amazon will be whether consumers will adopt its presumably lower-cost, more convenient approach over the established, more personal omni-channel models of CVS and Walgreens, according to Perez.

“Given our nation’s serious problem of medication non-adherence-which accounts for over 100,000 deaths per year and results in over $100 billion in avoidable costs annually-there is a need for and trend toward more patient-pharmacist interaction, not less. Thus, it remains to be seen whether Amazon’s approach-though presumably very convenient-will also be effective,” he says.