Amazon has entered several markets since it has started its online business with plenty of cash on hand to invest and a CEO that rarely gets it wrong in the business development.
Now it might be the turn of the $400 billion pharmaceutical industry, more precisely the retail pharmacy market, as the company is hiring “a general manager to lead a team to explore the idea of entering the pharmaceutical industry.”
The move from Amazon in not effecting only the player of the retail pharmacy market such as Walgreens, CVS, Express Scripts, Target and Walmart (that counts for 75% of all prescription revenues in 2016) and all those new start-ups such as PillBox, ZipDrug and PillPacks. Also big pharma, from Pfizer to Ortho McNeil to Teva, if and when Amzon will enter the market will have to how negotiates with suppliers.
Amazon has 300 million active users and over 66 million Prime users who pay $100 per year to get, at times, same hour delivery service. Furthermore at least two generations (the back-end of millenials and Gen Z) have grown up with Amazon as the main distributor for whatever their need and in the Prophet’s annual Brand Relevance Index ranked only second to Apple as the most relevant brand in the U.S. Not only, more importantly, it ranked number one on critical relevance attributes such as “meets an important need in my life,” “makes my life easier,” “is a brand I know I can depend on” and “is a brand I trust. All these data should put the pharma industry on high alert.
As Steve Kraus, a health investor with Bessemer Venture Partners states in CNBC interview: “The company might crawl, walk and then run…and it won’t restrict itself to one part of the chain. Instead, Amazon could work directly with manufacturers, become a distributor like McKesson, take on the role of a pharmacy benefits manager by negotiating discounts and sell drugs to patients as a licensed pharmacy.”
Kraus even suspects that Amazon could get more competitive prices on drugs, if it could fill drugs faster and demonstrate that patients are more likely to take their meds. “In Amazon style, it will want to own the consumer’s mind and wallet,” Kraus adds.