The conference raised important points about unregulated growth opportunities and new pharmacy arena players.
Payers are focusing on unregulated growth opportunities and everyone is wondering if, how and when Amazon can make it work in the pharmacy space, according to insights from the 2017 UBS Global Healthcare Conference, May 22 to 24, in New York, New York.
As U.S. healthcare spending races toward 20% of GDP (over $3.2 trillion in 2015), everyone in the business is chasing a bigger piece of the pie. While we put the patient at the center of every conversation we have, events such as JPMorgan and UBS are necessary when public companies need to brief analysts en masse, raise equity and the banks seek to court their next opportunities to ink lucrative financing deals.
Here are my top two takeaways:
In an era where consolidation in the industry shows no signs of slowing down, executives should anticipate the interest in, and competition for, private companies that excel in those unregulated areas to increase. This is precisely why private companies invited to present themselves treasure the opportunity, be it at the annual UBS, JPMorgan or Goldman Sachs healthcare events where it’s all about pipelines, earnings, competition, growth opportunities and the dollars.
According to Retail Touchpoints, “While 94% of all retail sales still take place in stores, e-Commerce sales are expected to increase annually by 17%, reaching $414 billion by 2018.”
With a stock price currently exceeding $1,000 per share, it’s hard to bet against Amazon’s visionary CEO Jeff Bezos. And though many believe the pharmacy space is ripe for disruption, the entrenched powers that be, along with a federal regulatory body or two, will fight to maintain as much of the status quo as they can while they deal with their own businesses’ needs amidst the shift from fee for service to value-based care. Walgreens and CVS are already losing their share of toothpaste, detergent and other sundries to Amazon. They will not cede market share of their pharmacy business to Amazon without a fight, though they will have to acknowledge a nascent retail level threat.
In the short term, retail pharmacies are more concerned with their next deal with Target, directing more prescriptions to their own PBMs and adding more in store care clinics within 10 feet of the pharmacy counter.
In the long term, Amazon will have to address the same complexities of the pharmacy business existing players have been dealing with for eons: Low margins on pharmacy fulfillment, acquiring talent and clinical pharmacy expertise, endless regulatory hurdles, navigating a complex path between providers and consumers, building their own provider network and sizing up the very long putt that involves distribution networks and branded medications.
Can Amazon really pull this off? Bloomberg healthcare columnist Max Nisen recently wrote, “Amazon has many advantages when it comes to selling just about anything. Hundreds of millions of people buy something from Amazon every year, something no other company, let alone another pharmacy, can really match. It's arguably better at managing speedy delivery and consumer experience than its potential competitors. That gives it a real chance to increase the market penetration of online and mail-order drug options.
“And because of the way they report revenue, PBMs may actually be far more profitable than they look at first glance. That might change if Amazon comes after them.”
The rigors of specialty pharmacy will likely keep Amazon at arm’s length from pharmacies currently operating in the space. Accreditation processes and requirements alone would be enough of a deterrent. Add on the systems, talent and patient care coordination needed to improve patient adherence and outcomes for the most difficult to treat, chronically ill Americans and Amazon’s impact on the specialty pharmacy industry will likely be negligible.
Marc O’Connor is chief operating office for Curant Health, a provider of enhanced medication therapy management and specialty pharmacy services.