How Amazon Could Disrupt Health Care and Lower Drug Prices

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Amazon has been described as the “everything store, ” but it’s missing one major category – prescription medicines. That might soon change, in the wake of Amazon’s roughly $1 billion acquisition of PillPack, an Internet pharmacy.

PillPack was acquired by Amazon in the summer of 2018. The acquisition is perceived by analysts as an indicator that Amazon plans to expand on PillPack’s digital pharmacy model, which focuses on elderly with complex prescription drug plans, to an overall catering to all pharmacy customers.

Amazon has stayed away from the market so far because it is heavily regulated, there is intense competition, and because health care in the United States is complex.

Prescription drug prescriptions are managed by Prescription Benefits Managers, including CVS Caremark and Express Script, that work with the government and employers to manage consumer’s medications. The PBMs aren’t always incentivized to give prescription drug customers the best deal. Therefore information about comparative drug prices and drug effectiveness is kept secret, according to CNBC’s Christina Farr.

The secrecy is partly the fault of archaic software that is used between pharmacies, employers, insurance companies, health care providers and the drug distributors.

It is believed that Amazon will get it’s foot in the door to the prescription drug marketplace by catering to customers paying for drugs out of pocket. The cash marketplace compared to insurance marketplace is larger than people think — a so-called consumerization of health is on the horizon. High deductible plans in health care are partly driving the expansion of the cash marketplace.

The ultimate hope is that people will be able to shop for lower-priced drugs just the way they shop for lower-priced tennis shoes or other products on Amazon — thanks to Amazon’s existing distribution system.

Surveys have found that 85 percent of Amazon Prime members have expressed interest making prescription drug purchases online.

The market could be worth tens of billions of dollars to Amazon, and the transition to Amazon delivering prescription drugs could happen in the next 5 years, according to drug supply chain expert Stephen Buck and Courage Health CEO.



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