Is the $400B prescription drug business ripe for an Amazon disruption?
CNBC reported yesterday that Amazon.com is hiring an executive to lead its entry into the pharmacy business. Two unnamed sources familiar with Amazon’s plans told CNBC of the planned hire as well as annual meetings the e-tail giant has held in recent years to explore a potential entry into retail prescription medicine sales.
CNBC’s sources said that Amazon’s move into selling prescription medicines is not yet a “done deal” due to the complexities of the pharmacy business. It is, however, moving ahead with the hiring of a general manager to formulate a strategy and lead a dedicated team.
The retail sale of prescription drugs is a $400 billion business in the U.S., Adam Fein, president of Pembroke Consulting, told The Washington Post. The top 15 pharmacies in the U.S. including CVS, Walgreens, Express Scripts, account for about 75 percent of that.
Mr. Fein estimates that Amazon would capture between five and 10 percent of the category’s sales were the company to enter the business. “I think they would challenge the economics of the retail pharmacy industry,” he said.
“Amazon could break open the space,” Steve Kraus, a health investor with Bessemer Venture Partners, told CNBC.
“Look at what Amazon has done to malls,” Mr. Kraus added. “In the future, when people say they’re going to a Walgreens or CVS, they might instead choose to go to Amazon.com.”
The biggest opportunity for Amazon to disrupt the market would be to partner with employer health plan providers, according to Kevin Schulman, a professor of medicine at Duke University. He told the Post that Amazon’s biggest hurdles would be compliance with patient privacy laws and other regulations.
Amazon’s access to consumer data could be a game changer, according to Prof. Schulman.
“If Amazon would know that you have diabetes or hypertension, they could do a lot with that data,” he said. “In principle, they could set up a marketplace where they behave differently, with different rules and different privacy practices.”
- Amazon is hiring people to break into the multibillion-dollar pharmacy market – CNBC
- What Amazon could do the business of selling prescription drugs – The Washington Post
- Amazon could ‘break open’ the pharmacy space, says health tech investor – CNBC
- PHC Licensing Program Manager – Amazon.com
DISCUSSION QUESTIONS: What do you think an Amazon.com entry into the retail pharmacy category would look like? How would it affect the sale of prescription drugs in the U.S.?