Newspaper article St Louis Post-Dispatch (MO)

Amazon's Pharmacy Strategy Will Take Years to Play Out

Newspaper article St Louis Post-Dispatch (MO)

Amazon's Pharmacy Strategy Will Take Years to Play Out

Article excerpt

Most consumers fill prescriptions by mail only when their insurer forces them to.

Amazon, which just bought online pharmacy PillPack, is likely to attempt to make long-distance drug dispensing so cheap and convenient that many of us will choose it rather than drive to a drugstore.

The stock market certainly seems to believe in that vision of the future: The value of leading pharmacy chains Walgreens and CVS fell by a combined $11 billion on the day the PillPack purchase was announced.

That's quite an impact for a deal that reportedly cost Amazon slightly less than $1 billion.

Amazon, which had been rumored for months to be seeking a way into the pharmaceutical business, found its entry via a five-year-old startup. PillPack helps patients manage multiple prescriptions by sending packages that are organized for daily consumption.

Adam Fein, a pharmaceutical industry consultant, notes on his Drug Channels blog that mail-order pharmacy sales have actually been declining, even as online retailers gain market share in other sectors. When insurers force people to use mail order for their long-term prescriptions, Fein writes, those companies "are not genuinely motivated to create an awesome consumer experience."

Amazon may change that. The online giant, Fein believes, can "reinvent consumer perceptions of non-store pharmacy dispensing."

He also sees big potential for Amazon among uninsured patients who pay full retail price for their prescriptions. These cash-pay customers are highly profitable for Walgreens and CVS, but they might be tempted by Amazon discounts.

It's less clear how Amazon's plans will affect pharmacy benefit managers such as Express Scripts. Those companies' mail-order businesses will face a deep-pocketed new competitor, but they also have some advantages.

With tens of millions of people in its network, Express Scripts can negotiate discounted prices from drug manufacturers. …

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