Elephant in the room: What Amazon's drug distribution deal means for pharma

Amazon is a disrupter. When the company crosses into a new industry, big things happen. From retail bookstores and grocers to aeronautics, there are few industries that Amazon has left untouched. In June, the Seattle-based company announced that it would enter into the pharmacy industry with the acquisition of PillPack, an online medication distributor.

What is PillPack?

These days, consumers have the expectation that almost anything can be purchased online. For seniors and individuals who may have trouble leaving home, the ability to receive prescription medications at home is a potential life saver. To satisfy this need, PillPack, which launched in 2014, packages, organizes and delivers medication directly to patients at home.

For patients who struggle with medication adherence, PillPack has been a way to simplify their daily drug routine. Each day's medication is placed in its own package, so patients can simply open the pack, take their meds and go about their day. Plus, PillPack does all this for the standard co-pay price.

Why did Amazon buy PillPack?

In late June, Amazon announced it had bought PillPack for $1 billion dollars. Since PillPack is already licensed to operate in 49 states and has a substantial customer base, it represents a huge opportunity for Amazon to make a splash in the $400 billion pharmacy industry, as reported by the Wall Street Journal.

After a behind-closed-doors bidding war with Wal-Mart, Amazon now represents a substantial competitor in an industry it previously had no bearing on at all. Overnight, the company gained access to nationwide distribution channels, facilities and operations. When news of the sale was first announced, shares of the three biggest pharmacy chains lost more than $11 billion in value.

In other words, there's now a very big elephant in the room, and no one is certain what will happen next. That said, major change may still be far off, as the industry is highly regulated and slow to move.

Prescription deliveries help patients adhere to their medication.

Will Amazon change the pharmaceutical landscape?

Though it's still too early to predict what Amazon's plans will be - the sale finalizes later this year. There's little doubt that the company will make a lasting change on the industry. Amazon doesn't typically maintain the status quo - it makes waves.

For pharmaceutical manufacturers, the PillPack deal isn't likely to change much any time soon. From a marketing perspective, the ability to get medications delivered is a major value proposition, however. If manufacturers can show physicians that patients are more likely to adhere to their products than another, it could make a difference in how often the product is prescribed. By focusing on the advantages for patients, pharma marketers can set up new ways to differentiate their brand in the marketplace. In a highly regulated industry, the ability to find any kind of market advantage is valuable.

Manufacturers may have to work with wholesalers to get their products into emerging distribution channels. Focusing on medications for chronic illnesses is likely the first step, as the patients who need those drugs may not be able to make regular trips to a physical pharmacy. Manufacturers, sellers and physicians will have to work together to educate patients about all of their options for getting their prescriptions.

The pharmaceutical industry never stands still for very long. From scientific breakthroughs to business acquisitions, there's always something new on the horizon. To learn more about industry trends, visit our resource center today.