Amazon Has Entered The Medication Market – How Will It Affect Pharmacies?

February 16, 2021 • Shannon Flynn

On Tuesday, November 24, 2020, Amazon will launch its online prescription fulfillment program, Amazon Pharmacy. The service will allow customers to order fulfilment of prescription medications directly from the ecommerce giant’s website.

The new program is Amazon’s latest foray into the world of medicine — and it’s almost certain to have major implications for the future of pharmacies in America.

2018 PillPack Purchase Leads to Amazon Pharmacy

The launch of Amazon Pharmacy was several years in the making. In 2018, after months of internal discussion, Amazon acquired PillPack, an online prescription fulfillment service, for $753 million. 

PillPack had grown quickly following its founding in 2013. Before the Amazon purchase, PillPack was competing with established pharmacies like CVS and Walgreens and was in acquisition talks with companies like WalMart.

At the time, it was unclear what plans Amazon had for PillPack. Now, most experts believe that the company plans to use their experience with the business to break into the $300 billion pharmaceutical market.

Amazon Pharmacy will offer savings of up to 80% and free two-day delivery for Prime members. Some medicines — such as Schedule II drugs — will not be available through the service.

PillPack will continue to operate as normal after the launch of Amazon Pharmacy, providing prescription delivery on a 30-day schedule for customers who need regular deliveries, typically consisting of multiple prescriptions.

How Will Amazon Pharmacy Shake Up the Industry?

Experts aren’t sure what kind of long-term impact the launch of Amazon Pharmacy will have on the industry. Some of the services that Amazon Pharmacy offers are nothing new for traditional pharmacies.

Many traditional pharmacies, like CVS, Walgreens and RiteAid, already offered mail-order prescription and prescription delivery services long before Amazon’s entry into the market. 

Health insurance plans have also traditionally covered mail-order prescriptions. Since the passage of the ACA, employers with more than 50 employees have been mandated to offer and report health care coverage to at least 95% of those employees. As a result, most full-time employees can already receive fully or partially-covered mail-order prescriptions from traditional pharmacies.

What traditional pharmacies don’t offer, however, are the kinds of savings that Amazon is advertising. Uniquely, Amazon Pharmacy provides major savings to customers who pay without using insurance.

It’s possible that the launch of Amazon Pharmacy could significantly disrupt the industry if offered savings are enough to draw customers away from traditional pharmacies.

Some industry leaders don’t expect a significant shake up in the industry any time soon.

In an interview with CNN Business, Doug Hirsch, co-CEO of GoodRx, an American healthcare company best known for its free prescription coupons, said that the company doesn’t consider Amazon Pharmacy to be a competitor.

Hirsch told CNN that “only about 5% of prescriptions are actually mail order“ and that the number of mail order prescriptions hadn’t actually increased that much during the pandemic. He also said that many of Amazon Pharmacy’s new offerings — like the service’s discount card — aren’t all that innovative. 

Pharmacy industry investors, however, seem less convinced that Amazon Pharmacy is nothing to worry about. Stocks for CVS, Walgreens and Rite Aid all fell by nine or more percentage points on the day of Amazon’s announcement.

Despite confidence from business leadership, GoodRx stocks also took a significant hit, plummeting more than 20% following the Amazon announcement.

For the moment, Amazon also doesn’t have any brick-and-mortar pharmacies, with no plans to introduce such pharmacies in the future. However, some industry observers have noted that Amazon could bring the pharmacy to the company’s chain of grocery stores, Whole Foods.

Amazon Pharmacy May Have a Significant Impact on the Industry

While some industry leaders suspect Amazon Pharmacy won’t cause a major shakeup, there’s reason to believe that the ecommerce giant’s new project could have lasting impact on the industry.

The mail service and discounts that the company offers, especially for Prime members and those paying without insurance, could reshape how pharmacies deliver medications and connect with their customer base. 

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