Other11/19/20

The other shoe drops: Amazon Pharmacy is here

Written by Sari Kaganoff

General Manager, Consulting

While this week’s announcement of Amazon Pharmacy resulted in a flurry of headlines, the news itself was a bit anticlimactic. This is what we anticipated when Amazon acquired PillPack back in 2018, in what seemed to be a play to attain pharmacy licenses. In our blog post about healthcare’s new world order, we discussed how Amazon is an anomaly among the other big tech players getting into healthcare due to the unique combination of their tech capabilities in addition to their retail footprint and customer experience. The only missing piece of the puzzle was clinical capabilities, which the PillPack acquisition provided.

Now that Amazon Pharmacy is here, what will this mean for the online pharmacy industry? We anticipate Amazon Pharmacy’s initial customers will primarily be existing Amazon customers—especially Amazon Prime members—ready to transition away from brick-and-mortar retail pharmacies and eager to online shop for all of their household needs in one place. CVS, Walgreen’s, and Rite Aid have already felt the impact, as evidenced by their stock prices tumbling this week.

Online pharmacies can maintain relevance by reinforcing their differentiation. Customers of convenience care online pharmacies like Ro, Hims, and Lemonaid—that also offer a telemedicine component—will continue to use those services primarily for physician access and the “one-stop-shop” experience. Pharmacy-only startups like Capsule and Alto Pharmacy can stave off the newcomer through customer service levels that Amazon Pharmacy doesn’t currently offer. GoodRx (who recently went public) will probably still maintain an edge with the coupon-clippers, although Amazon Pharmacy is taking a cut of that too by enabling people to use GoodRx coupons and compare prices before purchase.

That said, these competitive advantages might well be short lived. Amazon will likely incorporate telemedicine next—as it has with its employee benefit Amazon Care—and other healthcare services to compete as an end-to-end digital health platform. It’s never more clear that a market has come of age than when Amazon stakes their claim—and this week, it was digital pharmacy’s turn.

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