Amazon recently announced new pharmacy offerings which includes (1) Amazon Pharmacy https://pharmacy.camazon.com and 2) The Amazon Prime prescription savings benefit. Credit Suisse https://www.credit-suisse.com caught up with each of the drug distributors and some industry experts/consultants on this development.
Credit Suisse offers some quick thoughts on the news of Amazon entering the pharma industry. Analysts see the development of Amazon entering the pharma industry, as having long term implications, but the long term implications resulting from Amazon Pharmacy are unclear.
However, management teams point towards retail pharmacy chains, independent pharmacies, etc., as having had time to prepare for Amazon’s entrance for years now. Further, there have been many reports on the demise of independent pharmacies for decades, but this channel has proven to be resilient to some extent.
The 2018 acquisition of PillPack marked the entrance into pharmacy for Amazon, but PillPack has seemingly not had as much of an impact on the pharmacy space as was originally anticipated.
Notably AmenrisourceBergen (ABC) https://www.amerisourcebergen.com works with PillPack, but it remains unclear whether ABC will also partner with Amazon as part of the core Amazon Pharmacy service. However, relative to Cardinal Health and McKesson, we see ABC having some relative advantage given their PillPack relationship.
While Amazon Pharmacy offers mail delivery on select prescriptions, they will attempt to shift the paradigm towards mail order and away from brick-and-mortar prescription pick-up. The Amazon Prime Rx savings benefit has the potential to have an adverse impact on GoodRx https://www.goodrx.com.
For example, Amazon will offer Prime members discounted prescriptions outside of insurance at +50K pharmacies across the U.S. In comparison, GoodRx is accepted at over +70K retail pharmacies across the U.S.
Credit Suisse views Amazon’s Rx savings benefit as a similar program to GoodRx Gold, which is sold on a subscription basis. By way of background, the GoodRx Gold program is able to offer better prices on select prescriptions relative to the core GoodRx platform since GoodRx utilizes a single PBM in GoodRx Gold.
The single PBM network creates competition for pharmacies to be included in-network, which allows for higher discounts on prescription drugs. Amazon’s Rx savings program seems to be mirroring the GoodRx Gold offering where Amazon is selling access to discounted cash pay prescription drugs through the subscription based Prime offering and utilizing a single PBM.
In fact, the Amazon Rx savings benefit is utilizing Inside Rx which is a subsidiary of Evernorth (owned by Cigna). Amazon’s entry into the space was a risk, which many investors feared. This along with the investor mix (tech vs healthcare focused) is pressuring shares today. Given the disruption risk Amazon poses to PBMs, GoodRx management saw collaboration between them as highly unlikely.
As for Amazon Pharmacy and Amazon Prime Rx Savings Benefit, Amazon Pharmacy allows customers to complete an entire pharmacy transaction on a desktop/mobile device. The pharmacy accepts most insurance plans and Prime members receive unlimited, free 2 day delivery. Amazon Pharmacy shows customers the price of their prescription with insurance, as well as the discounted cash pay price available through the Prime prescription savings benefit.
Amazon Pharmacy is available to customers in 45 states excluding Hawaii, Illinois, Kentucky, Louisiana, and Minnesota. However, Amazon expects to expand to all 50 states over time. Amazon has also rolled out a prescription discount offering to Prime members, available through Amazon Pharmacy, PillPack https://pillpack.com, and over to 50K pharmacies across the U.S.
The discount offering provides savings of up to 80% on generics and 40% off brands. Inside Rx https://insiderx.com is administering the prescription discount offering. Prime members plus one additional adult in the household are automatically enrolled for the Prime Rx savings benefit.
For information and to provide feedback, email Jailendra Singh at Jailendra.singh@credit-suisse.com or call 212-325-8121.