Amazon.com founder and CEO Jeff Bezos in Seattle, Washington. (Photo by David Ryder, Getty Images)
News that Amazon plans to make a major push in the pharmacy sector has been greeted with a mix of perspectives for what a huge business with killer logistics could do to disrupt this portion of healthcare for better (or worse). Although several health IT startups have sought to address the challenge of drug delivery and medication adherence, the dent they make compared to what the likes of Amazon could do certainly gives one pause.
For Steve Kraus, a partner with Bessemer Venture Partners, it makes sense from a macroeconomic perspective. Diapers.com was one of two portfolio companies Amazon acquired from Bessemer. In a phone call, he observed that companies like Salesforce, Amazon, Apple, Google and Microsoft have all “dipped their toes” in healthcare but none have made a significant push. It is an economic imperative for them to not only play in healthcare but to increase their presence in this space, he said. And with $21.5 billion in cash, it’s well positioned to do that.
“I think Amazon could be a tipping point. It just makes sense to their core businesses,” Kraus said. “After pharmacy, I could see them going into genetic data. A huge percentage of its EBIDTA (earnings before interest, taxes and amortization) is from storage… Amazon will have to integrate with the physician prescription purchasing system. Maybe they could get it to you the same day” given that Amazon is looking to add drones to its supply chain fleet.
With such an appealing customer experience, Kraus mused, there are many different pharmacy and other healthcare products and services it could provide to get customers to spend more with them.
“If you were buying a drug for COPD, for example, it might trigger a follow-up question asking the customer if they need other associated devices with their treatment. They would be much better than any pharmacy for retargeting you to make sure you get your second scrip filled.”
Ryne Natzke, a partner with Madison, Wisconsin-based HealthX Ventures, said in an email that Amazon’s supply chain and distribution infrastructure could be a huge advantage in getting drugs to people quickly. He also speculated that Amazon’s move into the pharmacy space would probably have the biggest impact on distributors like McKesson and Cardinal Health by lowering drug costs through its scale.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
“I could envision Amazon sending a week’s worth of doses automatically with more straightforward packaging, reducing confusion for patients struggling with managing multiple medications. Additionally, it would be another choice for hospitals if Amazon wants to also go after the B2B market.”
Natzke actually sees the potential for Amazon to give healthcare startups a boost, especially if Amazon could provide data shedding light on why one third of prescriptions are unfilled.
“Early stage companies are trying to address the issue though automated reminders, tracking apps, smart pillboxes, and [remote monitoring]. Some of these startups could potentially be helped if Amazon makes some of that data available through APIs to help automate their workflows. Existing mail order pharmacies and traditional pharmacies should look to innovate in order to compete, potentially giving more opportunities for early stage groups to partner and move things forward quicker.”
Lorrie Carr, Chief Commercial Officer at Boston-based ZappRx, previously worked as Walgreens’ divisional vice president of enterprise specialty sales and product management. She sees two schools of thought in the healthcare industry about Amazon’s move and wrote in an email that she falls somewhere between them.
“One is that Amazon may displace current pharmacies given their technological capabilities and connection to consumers. The other is that the pharmacy environment is too complex for them to be as disruptive as they’ve been in other industries. Selling to consumers is very different from selling to patients, in terms of the regulatory environment and the complexities of ‘who pays for what’.
“I tend to fall somewhere in the middle of these two schools of thought,” Carr said. “Any ‘winners’ or ‘losers’ would be determined by the business model Amazon chooses. At this point, it is way too soon to tell.”
Photo: David Ryder, Getty Images
