Amazon entering pharmacy a “matter of when, not if”

amazon box Photo credit: Mike Seyfang.
Photo credit: Mike Seyfang

While speculation has been brewing for months, analysts say it’s now only a matter of time — but the Guild says people will continue to visit pharmacies for meds advice and services

Just two weeks ago, AJP reported that analysts at investment bank Leerink Partners had spoken with pharmacy executives and said is in talks with mid-size pharmacy benefit managers (PBMs).

Now Leerink has released a report saying that Amazon will “almost certainly” get into the prescription drug distribution business.

One of the analysts behind the report, David Larsen, has told Market Watch that “it’s a matter of when, not if”, adding that he expects an announcement in the next year or two.

“While Amazon is likely still researching what its ultimate strategy should look like … we believe it can create disruption to the existing market.”

Shares of the CVS and Walgreen drugstore chains both fell nearly 5% Friday following the release of the report, says CNN.

Meanwhile, Bernstein analyst Lance Wilkes said Amazon investors may not need to wait two years.

According to stock market website Benzinga, Mr Wilkes says: “Over the past five months we have stated that we think Amazon will enter the retail pharmacy industry, we think they will most likely partner/buy a PBM to enable their entry, and we think they will address the major challenges which have faced online (mail) pharmacy, which are user experience, convenience and price.”

There are skeptics among analyst circles, however.

“We are simply not convinced that Amazon is a real competitive risk for pharmacy,” said Mizuho analyst Ann Hynes just one month ago.

“We do not see any signals that suggest Amazon is building up capabilities internally to enter the pharmacy market,” she told Market Watch reporter Emma Court.

A Pharmacy Guild spokesperson says that despite reports that Amazon is looking to enter the US prescription market, it is “vastly different” to the Australian market.

“Of course that’s a vastly different market to the Australian market, where we have a Pharmaceutical Benefits Scheme, a highly subsidised medicines scheme which the government’s had in place since about 1948,” says the spokesperson.

“It’s very difficult to see Amazon—an online provider—really competing with the 5700 bricks-and-mortar pharmacies in Australia that provide not just a medicine, but the advice and professional service that goes along with it.

“Obviously there are already a few online medicine providers in Australia. Sometimes that might be convenient for people if they live remotely or in circumstances where they’re unable to get to a pharmacy.

“But 87% of Australians live within 2.5km of a pharmacy, so really that reflects that they like to go to their pharmacy, to the most accessible health professional.

“The flesh-and-blood pharmacist rather than an online portal is always going to be a preferable way to deliver very important healthcare and medicine.”

The Pharmacy Guild questions the assumption that Amazon would be “more effective” or efficient for consumers.

“It’s a question of whether it will be effective for consumers compared with being able to walk around the street to a nearby pharmacy, talk to a pharmacist who is very accessible, and get their medicine and have it explained to them and given advice … as opposed to buying something online – for the same price if it’s a subsidised medicine by the way, so not cheaper – and then having to actually mail the script in because it’s still a prescription medicine,” says the spokesperson.

“So I think there are some impediments there that work in favour of the very healthy face-to-face encounter that many Australians have, 350 million visits are made a year to Australian pharmacies.”

The retail giant is currently setting up in Australia, hiring more than 100 people in Sydney for roles in logistics, IT and security.

Digital marketing agency DataSauce says its local warehousing will allow it to “dramatically” expand the kinds of products it can deliver.

DataSauce conducted an online survey and found that 90% of Australians are aware that Amazon is on its way, but only half (48%) knew about the Amazon Prime offering—a premium service that offers shoppers free and fast shipping options, charging only an annual fee of $100.

“The Amazon Prime offering is more advanced than almost any of the services offered by retailers in Australia,” says DataSauce founder Tzvi Balbin.

“This means that even those who have upped the ante with quicker delivery times may still struggle to compete with this service and match the level of investment.”

The online survey also found that 71.3% of respondents shop online, meaning they’re prime candidates to want to use the Amazon Prime service.

However Mr Balbin advised Australian retailers not to try and beat Amazon at their own game and their deep pockets, saying retailers need to instead focus on the one thing that truly sets them apart from their competition.

“At the end of the day, to beat Amazon you need to focus on their weaknesses. Niche down, build and nurture a fanatical community, tell a story and leverage loyalty. After all, Amazon is a one size fits all.”

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1 Comment

  1. truman

    I think it is the breach of location rule if amazon do sell drugs online from their warehouse. I wonder how they obtain their pharmacy license.

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