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October 26, 2021

Amazon Pharmacy: An industry disruptor—or a misfire?

Daily Briefing

    Last year, Amazon announced the launch of Amazon Pharmacy, a move that many analysts thought could be disruptive in the pharmaceutical industry. But after its first year, some experts say Amazon Pharmacy is indistinguishable from other mail order pharmacies—though the company could be making moves to change that, Erin Brodwin reports for STAT+.

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    What Amazon Pharmacy offers

    Currently, Amazon Pharmacy provides discounts on prescription drugs through its subscription program, Amazon Prime, and allows customers to track their orders through Prime, Brodwin reports. It also allows customers paying with cash to price-shop their prescriptions through a partnership with Inside Rx, which allows Amazon to reference prices from Express Scripts.

    In addition, Amazon provides services through PillPack, which it acquired in 2018. PillPack offers customers personalized medication sorting into different packets, organized by the date and time they need to be taken. However, neither Amazon Pharmacy nor PillPack are able to ship Schedule II medications like Adderall or oxycodone, Brodwin reports.

    While Amazon Pharmacy does accept some insurance, its biggest discounts and long-term medication supplies are available only to cash patients.

    Kate McCarthy, senior director of health care industry research at Gartner, said she believes Amazon Pharmacy "is less about discounts and more about increasing [Amazon's] reach into the American household. It's about deepening relationships with people who are already loyal customers."

    How Amazon Pharmacy is performing so far

    Despite causing a stir when it was first announced, Amazon Pharmacy hasn't made any large waves in the pharmaceutical industry, some experts say.

    "Right now, I don't know if Amazon stacks up at all in the pharmacy space, to be blunt," said Antonio Ciaccia, CEO of nonprofit pharmacy research organization 46brooklyn. "But they're Amazon. To count them out would be a fool's errand."

    Unlike larger retail pharmacies, Amazon does not partner at a large scale with a pharmacy benefit manager (PBM), and it hasn't indicated yet whether it plans to partner with one, buy one, or build its own in the future, Brodwin reports.

    "Until they figure out the clinical piece of this, Amazon is just another mail order pharmacy without much volume," said Scott Knoer, CEO of the American Pharmacists' Association.

    One report from Adam Fein, a drug distribution consultant, projected that Amazon Pharmacy's market share will stay in the low single digits for at least the next five years "unless Amazon makes a large acquisition or embarks on a truly disruptive strategy."

    Future potential

    Experts told STAT+ that in order for Amazon to disrupt the pharmaceutical space, the company will need to go beyond what it's used to, potentially by linking Amazon Pharmacy to other parts of Amazon's entry into health care.

    For example, Amazon's smart speaker, Alexa, currently features skills that are HIPAA-compliant and allow it to remind users when they need to take their medications and order refills, Brodwin reports. Some companies, including Cigna and the digital pharmacy Nurx, have already started utilizing these features.

    And if Amazon wanted to develop in-person pharmacies, the company owns 500 Whole Foods stores where customers could speak to pharmacists about their medications, Brodwin reports.

    "In pharmacy, there will always be a need for brick-and-mortar facilities for people who are sick and just want to go and get their drugs," McCarthy said. "Whoever figures out the combination of what needs to be down the street from where I live and what should be in my home are the ones who are going to be successful in the future."

    Amazon could also start working with a PBM, but PBMs and insurers typically prefer customers use the pharmacies the PBMs own themselves, Ciaccia said.

    That said, Amazon announced earlier this month a partnership with Prime Therapeutics, a PBM, which will give members of the company's Blue Plan access to home delivery options through Amazon Pharmacy. Analysts told STAT+ this could be a way of seeing whether partnering with a PBM brings in more patients or commercial plans sponsors. It also could be Amazon's first move towards a bigger PBM strategy.

    Either way, analysts said Amazon certainly has the potential to be disruptive in the future, given its history of acquiring companies and how willing it is to experiment with new things.

    "Writing the obituary for Amazon Pharmacy right now is probably not a good idea," Knoer said. "They buy businesses. They figure it out." (Brodwin, STAT+ [subscription required], 10/21)

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