Amazon's Possible Strategy for Breaking Into the $560 Billion Pharma Market

Published: Aug 15, 2017

Amazon's Possible Strategy for Breaking Into the $560 Billion Pharma Market August 15, 2017
By Mark Terry, Breaking News Staff

Goldman Sachs published a 30-page report on how Amazon could break into the prescription drug market. Written by five analysts, the report points out that although Amazon has not explicitly stated it is interested in entering the prescription drug market, it has developed the secretive 1492 group, which is reportedly working on medical devices, and hired Missy Krasner, former vice president and managing director of Box’s healthcare and life sciences group to head up its pharmacy group. Box markets cloud management products and services.

The report cites five key points.

1. Amazon should start by partnering with a pharmacy benefits manager (PBM). PBMs act as liaisons between payers and the rest of the healthcare system, and according to the report, doing so would give Amazon “access to patient data and the potential to cross-sell related products.” One wonders if the analysts discussed an Amazon message saying, “We see you’ve been prescribed Viagra. Other people who bought Viagra also bought “50 Shades of Grey.”

2. The first thing Amazon’s presence in the prescription market would likely do is speed drug delivery and at-home delivery. However, it could lead to improved price transparency and cut out-of-pocket drug costs.

3. CNBC states, “Amazon could also become an online pharmacy, retail and online pharmacy, integrated PBM and online pharmacy, or handle drug distribution to pharmacies.”

4. A particular challenge for Amazon is demographics. Amazon’s customers skew younger and healthier than the age group that takes the most prescription drugs.

5. The report notes that Amazon could push the use of the Echo in clinical settings. “Imagine seeing a virtual doctor on your Amazon app, having it prescribe you a certain medication, and then tapping a ‘buy now’ button—all without leaving your home,” the report states. It’s easy to imagine the potential problems with this, including the additional complications of Health Insurance Portability and Accountability Act (HIPAA) compliance, security, encryption, reliability and accuracy, to name just a few.

The report is speculative. Amazon is definitely interested in healthcare and telemedicine, but hasn’t given any indications that prescription drugs and an online pharmacy is at the top of its priority list. And there is certainly potential criticism awaiting it if it does, particularly since Amazon is generally disruptive to any industry it enters. The most cynical critics might argue that healthcare faces plenty of disruption from the Trump White House and Congress without having Amazon and Jeff Bezos get in on the act.

Lorrie Carr, chief commercial officer of ZappRx, and previous divisional vice president of enterprise specialty sales and product management at Walgreens, points out that there appears to be two schools of thought when it comes to Amazon and healthcare.

“One is that Amazon may displace current pharmacies given their technological capabilities and connection to consumers,” Carr told MedCityNews. “The other is that the pharmacy environment is too complex for them to be as disruptive as they’ve been in other industries. Selling to consumers is very different from selling to patients, in terms of the regulatory environment and the complexities of ‘who pays for what.’”

Carr personally falls somewhere in between. “Any ‘winners’ or ‘losers’ would be determined by the business model Amazon chooses. At this point, it is way too soon to tell.”

Back to news