Dive Brief:
- After years of speculation, Amazon announced Tuesday that it will sell and deliver prescription drugs on its online platform, Amazon Pharmacy.
- When paying without insurance, Prime members will be eligible for up to 80% off for generic drugs and 40% off brand-name medicines.
- The stocks of CVS Health and Walgreens took a hit in early trading following Tuesday's statement. "The long-awaited launch promises to increase competition in the already competitive retail pharmacy industry," SVB Leerink analysts said in a note following the news.
Dive Insight:
Amazon is no stranger to disrupting industry, and this move is a direct competitive threat to retail pharmacy incumbents.
Over the years, the online retail giant has been making a slow march into the sector.
Two years ago, Amazon purchased PillPack, a company that delivers prescription drugs in pre-sorted packs, mainly to customers who need multiple medications daily to manage chronic conditions.
In October 2017, a year before PillPack, it was discovered that Amazon was quietly gaining approval and licenses via various state pharmaceutical boards across the country to become a wholesale distributor of drugs — giving credence to the speculation that Amazon was attempting to carve out some space in the pharmaceutical sector, though its specific intent was unclear.
The potential threat from Amazon helped spur the merger talks between CVS and health insurer giant Aetna, according to reports at the time.
A move to disrupt yet another American business sector was not unimaginable. That same year in 2017, Amazon announced it was set to buy the upscale and health-focused grocer Whole Foods.
Tuesday's announcement finally makes clear that Amazon wants to redefine how Americans get their prescription drugs.
The move is also a challenge to GoodRx, a platform for helping people comparison shop for prescription drugs that went public in September, industry analyst Adam Fein noted on Twitter. Amazon Pharmacy will look to convert consumers to paying for drugs with cash, which would be truly disruptive to the sector, he said.
1/7
— Adam J. Fein (@DrugChannels) November 17, 2020
At last! @amazon $AMZN finally gets serious #pharmacy https://t.co/kMs3gwAV7Z
But it’s hedging bets by simultaneously (1) copying @goodrx $GDRX and (2) offering a truly disruptive option
Following tweets explain Amazon’s moves w/in context of crazy US drug channel
Transparency will be an important focus of the Amazon Pharmacy venture, a likely nod to how complex and opaque prescription drug pricing is in the U.S. Amazon said it wants shoppers to be able to easily compare prices and shop for the lowest option available.
Here's a key distinction in how Amazon Pharmacy will operate: "Before checking out customers can compare their insurance co-pay, the price without insurance, or the available savings with the new Prime prescription savings benefit to choose their lowest price option," Amazon said.
A previously vexing problem for patients was that sometimes prescription drugs would be cheaper using the cash pay, or without using insurance. But pharmacists were sometimes barred from alerting patients to the discrepancy due to "gag clauses." In 2018, Congress passed a bill to ban gag clauses in certain plans.
Amazon Pharmacy shoppers will be able to input their insurance information and their clinicians will be able to send prescription information directly to the Amazon Pharmacy.
"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 a statement.
Prime Members will be able to leverage the discounted prices at 50,000 participating pharmacy locations in addition to the online platform. InsideRx, a subsidiary of Evernorth (formerly Express Scripts), will manage the savings benefit, according to Amazon.
