Dive Brief:

• Walgreens Boots Alliance's CEO Stefano Pessina on Thursday shrugged off the idea that Amazon might get into the drugstore business, saying the e-commerce giant was more likely to focus on less complicated retail areas. “Honestly I don't believe that Amazon will … because they have so many opportunities around world and in many other categories, which are much, much simpler than healthcare, which is a very regulated business,” Pessina told analysts, according to a transcript from Seeking Alpha.

• Amazon already sells medical devices and employs executives to deal with health care-related regulatory issues, and is said to be exploring how to ramp up its efforts in the pharmacy space. 

• Despite reservations, Pessina did say that Walgreens would be open to partnering with Amazon if it came to that: “If we were wrong and our belief was wrong, I believe that at the end of the day, we could find our goal in the new environment and we wouldn’t exclude to partner with them, we wouldn’t exclude to analyze the new situation of the market and to find our place adapting ourselves.”

Dive Insight:

Sales of prescription drugs provide drugstore chains with a steady stream of customers, but it's a volatile space. Big-dollar corporate and government contracts are won and lost, generic versions of often-prescribed medicines can ding sales, and the Affordable Care Act has brought some price pressures to the health care sector in general, bringing costs down for consumers but not necessarily for retailers. Added to the instability is the current political environment, where recent actions by Congress and the Trump administration are poised to disrupt the space further.

Amazon's major foray into brick-and-mortar via its proposed $13.7 billion acquisition of grocer Whole Foods has led to speculation that it could make a similar play in pharmacy. 

Although Pessina downplayed Amazon’s ambitions in the segment, Leerink Partners analyst David Larsen said in a note to investors that the segment is primed for an entry by Amazon, considering Rite Aid’s availability and Amazon’s strengths, including its logistical prowess and sticky Prime membership base. Amazon has “the scale, logistical expertise, distribution footprint, and devoted consumer following,” he wrote, according to Barron’s. “What it lacks are relationships with pharmaceutical companies and distributors.” 

It's not just Walgreens, Rite Aid or CVS that would be challenged by such a move; Amazon in the pharmacy space would also challenge Walmart, a major pharmacy player with the advantage of a huge physical store fleet that is increasingly willing to go head-to-head with Amazon in e-commerce. With new features added to its mobile app for pharmacy and money services customers, including new ways for shoppers to skip regular checkout lines, Walmart is looking to differentiate the shopping experience by offering the same level of convenience as Amazon while continuing to leverage its physical footprint, Stephan Schambach, founder and CEO of mobile platform NewStore, told Retail Dive in an email. (Schambach is also the founder of e-commerce platform Demandware, which recently sold to Salesforce).

But Walmart's new features won't necessarily stop Amazon from bringing its own strengths to the space, which is highly regulated, but also highly lucrative, he noted. "Though challenges may arise in entering a regulated market, breaking into a multi-billion market opportunity for the e-commerce company can lead to huge success," he said. "Speedy delivery options and lower drug prices is the next step for Amazon in addressing the massive demand for a simpler, faster, overall more convenient shopping experience."