Amazon will be deciding before Thanksgiving whether to move into the online selling and delivery of prescription drugs, and the news that the ecommerce giant could be entering the market sent shares of drug retailers Walgreens, CVS and Rite Aid tumbling on Friday.
“We are convinced that AMZN will almost certainly enter the drug distribution value chain within 2 years, evolving into a more disruptive offering over time,” brokerage firm Leerink analyst Ana Gupte wrote in a note to clients..
And according to CNBC, as well as a source familiar with the situation, when Amazon decides to make the move, it will expand its senior team with drug supply chain experts.
It isn’t surprising that Amazon would consider making the move, as analysts have estimated the U.S. prescription drug market at $560 billion per year. Amazon is well aware of the complexities, and typically spends years researching opportunities before making final decisions.
Goldman Sachs has speculated that the eCommerce giant will ultimately work to improve price transparency for consumers and reduce out-of-pocket costs. And another news report last month revealed that Amazon was considering getting into the mail-order pharmacy market, potentially targeting people who are uninsured or have high deductibles and pay cash for prescription drugs. Pharmacy executives said it would take 18 to 24 months or even longer to get drug licenses in all 50 states.
Amazon already has a business selling medical supplies online, such as gauze and thermometers. In addition, it has a health team called 1492 that focuses on both hardware and software projects, such as developing health applications for the Echo and Dash Wand. And its cloud service, Amazon Web Services, dominates the health and life sciences market.
In the past year, Amazon has hired and consulted with dozens of people about a move into the pharmacy market. The consumables team, which includes groceries, started the research, led by the division’s vice president, Eric French.
Amazon also brought on Mark Lyons from Premera Blue Cross to build an internal pharmacy benefits manager for its own employees, with sources saying that any decision potentially hinges on its success with this effort. And in May, the company began searching for a general manager to lead its pharmacy move, externally dubbed “healthcare.”