The vast majority Amazon Prime members who have health insurance would be willing to purchase prescription drugs from the retailer's website—suggesting that Amazon could significantly reshape the pharmacy landscape if it chooses to sell prescription drugs online, according to a recent survey by Deutsche Bank.
Download the executive's guide to all things pharmacy
Background: Amazon eyes pharmacy business
Amazon in 2017 began making business moves that suggested the company was planning to enter the pharmacy business. Over the course of a year, Amazon received approvals from 12 state pharmacy boards to become a wholesale pharmacy distributor and began selling its own line of over-the counter health products.
Amazon in June announced that it had entered a merger agreement to acquire the online pharmacy PillPack, which presorts and delivers prescriptions to customers in every U.S. state except Hawaii. Individuals familiar with the merger agreement said Amazon will purchase PillPack for about $1 billion in cash. PillPack said it had generated more than $100 million in revenue in 2017.
The merger agreement, which is expected to be finalized during the second half of 2018, is subject to regulatory approvals and other closing conditions.
Given Amazon's recent moves in the pharmaceutical sector, Deutsche Bank analysts surveyed Amazon Prime subscribers to assess their attitudes about purchasing pharmaceuticals from Amazon.com. The analysts found 85% of insured Prime members said they would feel comfortable purchasing prescription drugs directly from Amazon.com.
Based on the survey results and Amazon's recent moves, the analysts said Amazon's entry into the pharmacy business would be a logical next step.
Lloyd Walmsley, a Deutsche Bank analyst, said, "For Amazon, which has a ... wide variety of healthy and organic grocery options at Whole Foods, and the ability to order items using voice commands (Alexa), we think the opportunity to upsell pharmacy customers to purchasing other items is substantial."
Walmsley said he could see Amazon entering the $22 billion mail-order pharmacy market after the Amazon-PillPack merger is approved and beginning to use the company's 450 Whole Foods stores as pharmacy pick-up locations.
According to Walmsley, Amazon could generate an additional $3 billion in gross profit if the company obtains a 30% share in the mail order pharmacy market, about $55 billion in front office sales, and 4% of U.S. online health care advertising.
Walmsley said, "Amazon has a history of starting small, testing the market, and fine-tuning the service, before launching a full-fledged commercial operation. As such, we believe it is a question of when and where—and not if—Amazon enters the health care space more forcefully" (Franck, CNBC, 9/11; Paavola, Becker's Hospital Review, 9/12).
Next, learn 5 ways to control the flow of drug expenditures
Prescription drug expenditures are the fastest growing component of health care spending, putting pressure on health systems' inpatient margins while also creating new revenue opportunities in the outpatient setting.
Access our infographic to learn five ways to control the flow of drug expenditures, while reducing spending and growing revenues.
Next in the Daily Briefing
Inside lawmakers' plan to crack down on 'surprise' medical bills