Amazon Business, the Amazon unit that sells bulk products to businesses, had mulled selling pharmaceutical products but decided against it.
CNBC, citing people familiar with the matter, reported that Amazon found the pharmaceutical market more challenging than anticipated. As a result, the eCommerce giant is now focused on selling medical supplies to hospitals and smaller clinics via its Amazon Business service.
The challenges Amazon is facing underscore how hard it is to enter the pharmaceutical market, even for major players. While there have been fears that Amazon will enter the market, disrupt it and eventually take it over, it appears that it will take some time before the company becomes a formidable competitor in the pharmaceutical and healthcare arenas.
As CNBC reported, Amazon shifted its focus partly because it couldn’t get large hospitals to overhaul how they purchase medical supplies, which usually involves middlemen and relationships. This challenge occurred despite Amazon having an advisory board that includes executives of major hospitals. Those hospitals have long-standing contracts with big distributors, such as Cardinal Health and McKesson. What’s more, many hospitals own stakes in entities that negotiate on their behalf.
Amazon would also need to develop a logistics network to handle temperature-sensitive products.
However, it’s possible that Amazon hasn’t completely ruled out getting into the pharmaceutical distribution business. Reports have speculated that the company may choose to sell prescription drugs directly to consumers. Amazon Business could also decide to make a move in that area if its business grows.
At the same time, Amazon is also looking at other healthcare initiatives with teams around the country, such as the Alexa team and Grand Challenge team, which is its secretive unit. “As we’ve developed Amazon Business, we’ve used our working-backwards methodology for consumers and applied it to the needs of business customers and sellers. One of the ways we do this is convening advisory boards from across the industry to give us feedback so we can continue innovating on behalf of customers,” an Amazon spokesperson told CNBC.