Amazon expected to sell prescriptions online, shake up drug industry

One news network, CNBC on Friday reported Amazon could decide about online prescription drug sales prior to Thanksgiving, but the news network did not release who its sources were.

Amazon is now researching opportunities in this market, which is estimated to be at $560 billion per year in the US.

In May, Morgan Stanley estimated $106 billion of the $465 billion USA pharma business was done through mail-order prescriptions.

Amazon has been eyeing the healthcare space for years now, but according to a new report from CNBC, the company is closer to making the plunge than previously expected. Year-to-date, AMZN has gained 32.22%, versus a 15.38% rise in the benchmark S&P 500 index during the same period.

Amazon Web Services, its cloud platform, is a common go-to for medical and health companies and the company has been increasings its presence in that niche.

Bloomberg points out that Amazon has a long-standing interest in prescription drugs, an industry with multiple middlemen, long supply chains and opaque pricing.

During the 1990s, Amazon invested in Drugstore.com and CEO of Amazon Jeff Bezos was on the startup’s board. Walgreens eventually purchased the site and shuttered it past year to focus on its own branded website Walgreens.com.

In a letter to clients, brokerage firm Leerink analyst Ana Gupte wrote that Amazon has been assessing the drug retailing market and hiring experts in the field to flesh out the venture. CVS declined to comment, and referred to remarks made by its chief executive officer, Larry Merlo, on an earnings conference called on August 8. The pharmacy business has “many barriers to entry, ” Merlo said at the time.

Pharmacy benefit managers, or PBMs, administer drug benefits for employers and health plans, processing the prescriptions pharmacies dispense. Currently, the final prices of many medications get negotiated in deals behind closed doors between PBMs and drug makers. The three biggest drug benefit managers – CVS, Express Scripts Holding Co. and OptumRx, a unit of insurer UnitedHealth Group Inc. – process about 70 per cent of the nation’s prescriptions, according to Pembroke Consulting. Amazon would be entering a deeply entrenched market with well-established competition and a thick tangle of regulatory challenges.

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