Amazon and Pharma: Is the Hype Real?

May 24, 2017

It’s no longer a question of if Amazon will enter the US pharma space, it’s now a matter of when, how, and what its strategy will be.

That was what life science analysts—who spoke with Pharm Exec during the FT US Healthcare & Life Sciences Summit in New York last week—said when asked about the onslaught of articles speculating Amazon’s next move. Those were sparked after a recent published report said the company is hiring a general manager to possibly help them break into the space.

“I fully expect them to [enter the pharma market],” said Hussain Mooraj, principal, strategy & operations, US life sciences, Deloitte. “It’s hard to describe what Amazon is thinking, but, based on the pilots done already, I wouldn’t be surprised if they entered the space within the next 12-24 months.”

There are several ways Amazon could enter the pharma market.

Mooraj said he expects the company to “make strategic acquisitions” in the space, likely some type of online pharmacy, or pharmacies. By doing this, it would eliminate some of the regulatory hurdles Amazon would face if it started from scratch.

“They would have to do a number of value-chain acquisitions,” he said.

One possible strategy that Amazon could take would be to enter the over-the-counter (OTC) market in a specific region, or start with just one therapeutic area and then expand from there.

This strategy is not unlike what Amazon has been doing in Japan, where its Prime members are able to receive same-day delivery of cosmetics and medicines, and certain prescription drugs may be purchased. To do this, the buyer must have their order approved by a pharmacist and provide their medical history.

Open arms or closed doors?

The thought of Amazon, which has been a game changer for a number of other industries, entering the pharma space has the community intrigued.

“Large, integrated brand manufacturers—they are curious, eager, and less apprehensive,” Mooraj said. “Those with generics know Amazon has significant negotiating power, but they are also frustrated with PBMs (pharmacy benefit managers) and how they negotiate.”

Amazon entering the pharmaceutical space could help patient compliance. Think about it, people are already accustomed to pulling up the retailer on their mobile devices to order items they need.

“In typical Amazon fashion, they are going to leverage technology to provide a better experience than most traditional players are able to do,” Mooraj said. “And that’s something patients and consumers should look forward to.”

Comments

SG&A

This market has significant SG&A costs...and is a great target for Amazon. Mooraj makes some solid points. Good article...great insight.

Consumer benefits

I'm not so sure every consumer and patient is going to welcome Amazon covertly amassing, leveraging and flogging their medical history...

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