Can Amazon disrupt the pharmacy industry?

Amazon has experimented with different projects in healthcare the past few years, but its current focus seems to be at the pharmacy counter — the digital one, at least.

Its latest declaration to the industry came last week when it debuted RxPass, a $5-a-month generic drug plan for Prime members.

With the new service, "Amazon surely is disrupting the retail pharmacy business," Kiran Avancha, PhD, chief innovation officer of Scottsdale, Ariz.-based HonorHealth, told Becker's. "They would have a reach of 150 million prescription users who have taken at least one medication from what they are offering."

Others aren't so sure.

Jeff Rosner, executive director of pharmacy sourcing and supply chain analytics of Cleveland Clinic, said it's "unlikely to be particularly disruptive" because other companies have similar offers.

The $5 initiative is Amazon's latest in a series of steps into the pharmacy business. In 2018, the tech giant acquired online pharmacy PillPack for $753 million. Two years later, it launched Amazon Pharmacy.

And even as Amazon had laid off tens of thousands of employees in recent months, it has been hiring aggressively for its pharmacy unit. Amazon Pharmacy has also been landing contracts with payers including Centene Medicare Advantage and several Blue Cross Blue Shield affiliates.

"Amazon clearly can disrupt the pharmacy industry. They have the scale, technology, supply chain, home delivery and extreme focus on customer experience to do all of it and more," said Richard Zane, MD, chief innovation officer of Aurora, Colo.-based UCHealth. "More importantly, however, is that they also seem to have the courage to take on the [pharmacy benefit manager] industry, which is so pathologically intertwined in the dysfunction which is the American pharmaceutical machine that to ignore it is to not even try."

In addition to RxPass and PillPack, Amazon Pharmacy "[accepts] a broad range of insurance plans, [has] low Prime pricing, free home delivery and pharmacists available 24/7," a spokesperson told Becker's.

"Amazon has a long tradition of innovation, and our work in the healthcare space is no different," the spokesperson said. "Our healthcare teams are committed to creating and growing healthcare services that help make our customers' lives easier, better and healthier."

While several health system innovation and digital chiefs told Becker's they predict Amazon will change the pharmacy industry, hospital pharmacy leaders are more skeptical.

Kuldip Patel, PharmD, senior associate chief pharmacy officer of Durham, N.C.-based Duke University Hospital, said Amazon Pharmacy has simply picked off the "low-hanging fruit" of outpatient medications.

"Growing [Amazon's] model to the more complex therapies or medications that require special handling (e.g. storage restrictions, biologics, gene therapies) will be a challenge and likely one that Amazon may have difficulties in overcoming," Dr. Patel said. "Many of the medications approved in the last decade and future medicines will fall into this category of complex therapies, making this a crucial success factor for growth."

Nilesh Desai, chief pharmacy officer of Louisville, Ky.-based Baptist Health System, said Amazon's disruptive capabilities will be curbed by the industry's complexities and reliance on "providing great patient service with effective communication and follow-up."

Others leaned more toward Amazon's ability to influence, rather than disrupt, the industry.

The roughly $1 trillion company's entrance into pharmacy won't be transformative but will "force large chains and mail-order pharmacies to become more patient-centered," said Jerry Storm, senior vice president of pharmacy services of Peoria, Ill.-based OSF HealthCare. 

Michael Evans, chief pharmacy officer of Danville, Pa.-based Geisinger, agreed, saying, "This type of competition is healthy and benefits the consumer."

Predictions on Amazon's next moves

For the future, Amazon might look into generics manufacturing or commercial-like insurance for Prime members, said Saad Chaudhry, chief digital and information officer of Annapolis, Md.-based Luminis Health.

Or they could establish a retail delivery service through subsidiary Whole Foods, said Jeff Cohen, MD, chief physician executive of community health and innovation at Pittsburgh-based Allegheny Health Network. Either way, he said the company has the "scale, scope and logistics" to make competitors like CVS, Walgreens and Walmart nervous.

"If [Amazon's] retail business is a model, then they will be able to fill an order and deliver it within 24 hours of receipt for most meds," Dr. Cohen said. "The infrastructure behind this is what makes it possible — [Amazon Web Services] and a business model which makes them very effective logisticians."

Amazon also has the technical ability to improve care delivery and value in the pharmacy space, which currently lacks effective data sharing and analytics for medication compliance and its associated costs, said Philip Payne, PhD, chief data scientist and director of the Institute for Informatics at Washington University School of Medicine in St. Louis.

"Amazon is laser-focused on customer delight (think Amazon Prime) and knows how to operate at scale in low-margin businesses," said Nigam Shah, PhD, chief data scientist of Palo Alto, Calif.-based Stanford Health Care. "Those talents are highly relevant in the pharmacy business, especially medications for chronic conditions where cost-effective and simple ways to get medications patients need are urgently needed."

Dr. Avancha, the innovation chief of HonorHealth, agreed that Amazon's chances of breaking the pharmacy industry will depend on what it does next. With the margins on generic drug sales "razor thin," Amazon may have to have its own generics manufactured by "white-label" contractors or build their own plants.

"Eventually, these issues would force them to raise their drug pricing to recover their distribution and manufacturing costs," said Dr. Avancha, who is also a registered pharmacist. "So in the long run, it becomes a question of sustainability, and [Amazon] is vulnerable to competition, since retail pharmacy giants like CVS and Walgreens are already evolving their business models."

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