• Health Tech

Can Amazon Revolutionize the Pharmacy Industry?

February 09, 2023

Amazon’s recent focus in the healthcare sector has been on disrupting the digital retail pharmacy business. The company introduced RxPass, a $5-per-month generic drug plan exclusively available to Amazon Prime members. This move has garnered attention and opinions from various experts in the industry.

Kiran Avancha, PhD Chief Innovation Officer of HonorHealth, sees Amazon as a disruptive force in the retail pharmacy business, given its potential reach of 150 million prescription users. However, Jeff Rosner, Executive Director of Pharmacy Sourcing and Supply Chain Analytics at the Cleveland Clinic, believes that Amazon’s offering may not be particularly disruptive since other companies have similar plans.

RxPass is just the latest step in Amazon’s expansion into the pharmacy sector. In 2018, the tech giant acquired online pharmacy PillPack for $753 million, and two years later, it launched Amazon Pharmacy. 

Richard Zane, MD Chief Innovation Officer of UCHealth, believes that Amazon has the necessary scale, technology, supply chain, and customer experience focus to disrupt the pharmacy industry. Zane also highlights Amazon’s willingness to take on the pharmacy benefit manager industry.

Amazon Pharmacy, in addition to RxPass and PillPack, accepts a broad range of insurance plans, offers low pricing for Prime members, provides free home delivery, and has 24/7 pharmacists available, according to a spokesperson.

While experts foresee Amazon’s transformative impact on the pharmacy industry, hospital pharmacy leaders express skepticism. They argue that Amazon has mainly targeted the “low-hanging fruit” of outpatient medications and may struggle with the complexities of handling more complex therapies and medications with special requirements.

Some experts believe that Amazon’s entry will influence rather than disrupt the industry, pushing large chains and mail-order pharmacies to become more patient-centered. This competition is seen as healthy and beneficial to consumers.

Looking ahead, said Philip Payne, PhD, Chief Data Scientist and Director of the Institute for Informatics at Washington University School of Medicine in St. Louis. speculate on Amazon’s future moves in the healthcare space. Possibilities include generics manufacturing, commercial-like insurance for Prime members, or establishing a retail delivery service through subsidiary Whole Foods. With Amazon’s scale, scope, logistics capabilities, and technical prowess, competitors like CVS, Walgreens, and Walmart may feel the pressure.

Amazon’s expertise in customer satisfaction, operational efficiency, and low-margin businesses could also improve care delivery and value in the pharmacy space. The lack of effective data sharing and analytics for medication compliance and costs presents an opportunity for Amazon to make a difference, particularly for chronic conditions, said Nigam Shah, PhD, Chief Data Scientist of Palo Alto, Calif.-based Stanford Health Care.

Ultimately, Amazon’s success in the pharmacy industry will depend on its next steps. With thin margins on generic drug sales, Amazon may need to consider manufacturing its own generics or building its own plants to recover distribution and manufacturing costs. The long-term sustainability of their approach will be tested, as retail pharmacy giants like CVS and Walgreens are already evolving their business models.