I could totally see a time in which you could be sitting at home with your
Amazon Alexa speaker device and you could say, "Alexa, refill my
prescription." And three hours later, someone arrives to your door,
there's your medication, you don't even have to leave the home.
It may sound too good to be true, but some analysts think that within the
next few years, it could be a reality.
Just recently, the company announced that its voice assistant, Alexa, now
has HIPAA-compliant skills, meaning it can work with health developers
that manage protected health information to help people do things like
store prescription information, track blood sugar or book doctor's
appointments on their device.
Alexa, ask Livongo my last BG reading.
Your last blood sugar reading, taken 55 minutes ago, was 78 milligrams per
deciliter.
It's another example of Amazon's push into healthcare, coming on the heels
of the retail giant's acquisition of PillPack, an online pharmacy that
makes home deliveries to customers who take multiple medications daily.
The acquisition spurred lots of speculation that Amazon is aiming to
disrupt the $934.8
billion dollar global pharmaceutical industry, with the goal of allowing
consumers to order and refill their prescriptions just as easily as they
would buy electronics or clothing off of Amazon Prime.
I get my cat food, I get my Band-Aids there, but the one thing that
consumers cannot buy on Amazon is prescription medicines.
We've been waiting with bated breath since PillPack was acquired by Amazon
in the summer of 2018 for the company to make a formal announcement about
its pharmacy ambitions.
While PillPack is geared towards older customers and caregivers who need
help keeping track of various prescriptions, analysts see Amazon's
acquisition as an indicator that the e-commerce giant plans to expand on
this digital pharmacy model, eventually catering to all pharmacy-goers.
I don't think it would be very difficult to kind of take the success
they've had with PillPack and extend it into acute medications for
instance, or for patients that may be on one or two medications a month.
Customers would certainly be excited to bid farewell to the long pharmacy
lines.
Eighty five percent of Amazon Prime members indicated they'd be interested
in using an Amazon pharmacy service.
The opportunity in prescription drugs for Amazon is huge, but they've
stayed away from the space for a few reasons.
It's heavily regulated.
There's some entrenched competition.
Lots of companies have tried to get into this space and failed.
Healthcare in the U.S.
is complex.
Prescription drugs are usually administered by pharmacy benefit managers
or PBMs, middlemen like CVS Caremark and Express Scripts, that work with
the government and employers to manage consumer's medications.
However, these PBMs aren't always incentivized to give consumers the best
deal, and so they keep information about comparative prices and drug
effectiveness secret.
These types of competitive barriers and logistical complexities have
historically dissuaded players like Amazon from entering the market.
The real problem isn't the ability to apply an e-commerce model to
pharmacy, but the ability to find ways to do this coordination in an
efficient way.
And you have doctors over here completely siloed away from everyone and
insurance companies over here, PBMs over here, siloed away from everyone
as well.
And the pharmacy is forced to try and coordinate between the three without
the capabilities to do so.
Gamache-Asselin says the silos are at least partly the fault of the archaic
software that doctors, PBMs and pharmacies rely upon.
Alto and other online pharmacies like PillPack are doing what they can to
simplify these systems on the pharmacy side.
But in the meantime, analysts say Amazon could get its foot in the door
with an initial focus on consumers who are paying for their prescriptions
out of pocket.
There's the trend that people refer to in the industry as the
consumerization of health, which basically means that consumers used to
rely on their insurance, so they didn't think so much of, how much does
healthcare cost?
When can I get a better deal and where?
But now they do, because increasingly with the rise of high deductible
plans and the number of people who are forgoing insurance altogether,
there is a huge chunk out there that is financially incentivized to start
thinking about their healthcare and take charge.
The good thing for Amazon is that the quote unquote cash marketplace is
actually a lot bigger than most people suspect.
The numbers say that cash prescriptions are 8 percent, but in actuality,
when you add in the high deductible portion of the marketplace, 20 to 30
percent of prescriptions are likely being paid for outside of the
consumer's pocket.
Focusing on these consumers first would give Amazon the chance to prove
itself and its capacity for superior customer service without the
complexity of dealing with PBMs directly.
And down the road, analysts speculate that if Amazon acquired, partnered
with, or became a PBM itself, it could bring greater transparency to the
industry. Eventually, the hope is that consumers could compare
pharmaceuticals on Amazon as easily as they could compare tennis shoes,
finally forcing the drug companies to compete on price and quality.
Whether it's books, music or toys, Amazon can take out a similar amount of
cost out of prescription drugs as they can in those categories.
And largely speaking, that money goes right back into the payer's pocket,
meaning lower prices for consumers out of pocket and lower prices for a
health care plan.
While Amazon definitely isn't the first to try and simplify the pharmacy
experience, it's by far the largest.
Beyond PillPack and Alto, a number of other prescription delivery
start-ups like NimbleRX and Capsule have popped up in the last few years,
but it will take time for them to successfully operate in all 50 states.
Amazon however, already has the infrastructure in place to pack and ship
goods on a massive scale.
So for Amazon, I think this is all going to be an easier process because
they're a huge company, they have this massive logistical engine already
in place.
So I think they could come in and essentially do a version of what many
start-ups have tried to do before and do it more quickly and do it better.
Buck says it wouldn't take long for Amazon to get the logistics in place.
From a technical perspective, from an operational perspective, I think they
could accomplish this in a very short period of time.
There's no doubt that they could be in the marketplace here within the
next five years, operating a standalone pharmacy that is offering
competitive cash prices, starting to build third party networks.
And beyond delivery capacity, Gamache-Asselin says Amazon could use their
broad reach to solve fundamental problems with transparency and
coordination in the industry.
We don't expect Alto to be the only pharmacy anytime soon.
Our biggest problem is going to be, helping drive systematic change.
Amazon is a formidable company and given their scale and their size, I
think they'll be an extremely helpful disruptor and catalyst to bring some
of those changes to life.
Undoubtedly, taking on the complex pharmaceutical industry will be a huge
challenge. But Amazon has lots to gain.
By entering into the pharmacy market, Amazon could be tapping into an
opportunity that is worth tens of billions.
This is a massive market for them and I think could propel them into the
next phase of growth.