Will Amazon Enter the Online Pharmacy Market?

Amazon may be in the final phase of its decision to enter the online prescription drug sales market, according to analysts. Although Amazon has declined to comment, experts believe the company will decide before Thanksgiving whether it will enter the marketplace.

Earlier this year, Amazon had reportedly hired a manager to lead the company’s research into the pharmacy market and related business strategies, and was said to be recruiting among pharmacy experts. The head of Amazon’s consumables division, which includes groceries, has kicked off research into online prescription drugs sales, and the company also hired Mark Lyons, formerly of Premera Blue Cross, to build an internal pharmacy benefits manager (PBM) program for Amazon employees, which could potentially be increased in scope.

Still, analysts note that Amazon’s possible move to online pharmacy sales is not a sure thing, as the company is well aware that the drug supply chain is complex and full of regulatory hurdles and well-established competition.

Goldman Sachs issued a report in August 2017 forecasting that Amazon would look to improve price transparency for pharmaceutical consumers and reduce out-of-pocket costs, but said that the retailer would likely start by speeding up the drug-delivery process and facilitating at-home delivery. The Goldman Sachs report speculates that Amazon might start by partnering with a PBM to provide access to patient data and allow the company to cross-sell related products.

Stephen Buck, co-founder of GoodRx—a website and mobile app that tracks prescription drug prices in more than 70,000 US pharmacies and offers coupons to consumers—told CNBC that Amazon could introduce a great deal of transparency into what drugs really cost. Buck predicts an Amazon PBM could compete with big PBMs like Express Scripts and CVS Health. Buck believes that online pharmacy sales is a $25 billion to $50 billion market opportunity for Amazon, but notes that the company would have to contend with challenges presented by prescription transfer laws (regulations guiding transferring prescriptions between pharmacies and for controlled substances) and electronic prescribing.

Amazon CEO Jeff Bezos was previously involved in sales of online consumer health products through Drugstore.com in the late 1990s, when Amazon bought 40% of the business. However, Drugstore.com was sold to Walgreens, which eventually closed the site in 2016. Amazon already sells medical supplies and equipment in the United States, and has launched same-day delivery for pharmaceuticals in Japan, where local pharmacists must approve medication delivery to patients.

Writing in Pharmacy Times in May 2017, Timothy Aungst, PharmD, asked whether Amazon’s entry into online prescription drug sales will mean drone-delivered medications, same-day delivery, and pop-up recommendations for products related to an individual’s health based on his or her past purchases. “Points on your Amazon Prime Account?” he asks. “And of course, recommended products for your health and needs because they will figure out your past medical history from all this and make money off of your health.”

Aungst suggests that if Amazon enters the online pharmaceuticals market, its entry could create competition for other large-scale players in pharmacy, a scenario that may benefit patients by reducing costs.