Amazon Is Disrupting the Pharma Industry

When Amazon acquired PillPack for roughly $750 million in June 2018, it was the first official step toward entry into the $300 billion U.S. pharmaceutical market. The retail giant quickly added 50 new roles to help build and run automated pharmacy fulfillment centers.

In 2019, Amazon acquired Health Navigator, which creates software for online healthcare services, and folded into its Amazon Care telehealth service for its employees. Now, Amazon Care is rolling out to other businesses.

More recently Amazon began negotiations with insurance companies that will allow it to contract directly with health plans and employers to sell prescription drugs.

The company has been advancing swiftly in its effort to disrupt the healthcare market. Let’s look at some of its other moves and where Amazon’s advantages lie.

Amazon Pharmacy Launches

In late 2020, Amazon announced the opening of Amazon Pharmacy, through which at-home delivery is available. Consumers can place orders via the website or through the Amazon App.

In addition, Amazon Prime members are eligible for savings of up to 80% on generic prescriptions and up to 40% off brand name drugs. Medications can be purchased at Amazon Pharmacy or at over 50,000 participating pharmacies in the U.S., including Walgreens, CVS, and Walmart.

Amazon Pharmacy will accept most forms of insurance and customers can use flexible spending accounts or health savings accounts to buy prescriptions on the service.

Medications will require a prescription from a licensed healthcare provider. But Prime members do not need insurance to complete a transaction through Amazon Pharmacy. And customers are able to speak to licensed medical professionals to get assistance in obtaining prescriptions. 

AI and Drug Development

In late December 2020, four pharmaceutical companies–AstraZeneca Pharmaceuticals, Pfizer, Merck, and Teva Pharmaceuticals–announced a partnership with Amazon Web Services and Israel Biotech Fund to launch AION Labs, a ground-breaking organization that will allow drug developers to harness artificial intelligence technologies and computational science to solve therapeutic challenges.

AION Labs will invest in early-stage start-up teams focused on AI and computational biology in drug discovery and development. Its aim is to harness artificial intelligence and the scale and security of the cloud to find new treatments more efficiently, avoid animal experiments, and advance healthcare towards patient-centric precision medicine. 

Advantages for Amazon

Because of the company’s tremendous scale, negotiation and lobbying capacities, and reputation for customer satisfaction, Amazon is well-positioned to make a big splash. Among the top advantages are:

• Big drug price discounting for cash customers

The pharmacy supply chain in the U.S. is filled with layers, is highly convoluted, and runs on unnecessarily complex business models. Amazon has the technology, resources, and business model to streamline the entire pharmaceutical supply chain, reducing prices at each link in the chain.

• Physical presence with Whole Foods or pharmacy partnerships

The ecommerce giant is expected to open in-store pharmacies in Whole Foods or partner with retail pharmacies to extend access to patients who prefer a brick-and-mortar experience. Major retail competitors like Target, Costco and Wal-Mart have all implemented in-store pharmacies, so Amazon will look to counter those presences.

• Better alternative to the existing convoluted PBM model

The existing pharmacy benefit manager (PBM) model is convoluted with middlemen, causing employers to rethink plan management. A significant majority of large U.S. employers have claimed they were willing to switch to an alternative to the current PBM model, which will allow Amazon to enter employer-paid plans.

• Becoming DSCSA-ready

The Drug Supply Chain Security Act (DSCSA), which will be in force in 2023, requires that all medications be traceable from end to end. To address this, Amazon has applied for wholesale pharma licenses, which means it will only need a manufacturer’s license to be able to manage medications from beginning to end without stepping outside of its own supply chain.

The allure of Amazon Prime delivery coupled with lower prices makes the company’s initiative appealing to patients. It’s still too early to tell what the adoption rate will look like, but if Amazon disrupts the pharma industry the way it has others, it’s a sure bet it will be a major player for years to come.

Interested in engaging HCPs? Elsevier offers digital marketing solutions in high impact publications that offer brand credibility and subject relevance – contact your therapy lead today.  

Article Written by: Alex Brown