August 15, 2017
A recent report from Goldman Sachs suggests that Amazon will likely have to partner with a large pharmacy benefit manager (PBM) as it plans to enter the pharmacy distribution business.
Recently, rumors have surfaced that Amazon is looking to move into health care. Experts have speculated that the large, direct-to-consumer, online retailer would likely expand by moving into the mail order pharmacy and medication distribution sector. This speculation was further flamed after Amazon hired a general manager to lead a pharmacy unit.
The reports, written by a team of five analysts, noted that Amazon will likely have to partner with a large PBM in order to properly scale its mail order pharmacy business. By purchasing a larger PBM, Amazon would gain entrance to the already crowded market without many of the barriers that would come with starting from the ground up. The report also noted that the startup costs of a partnership would be considerably lower compared to building a pharmacy business from the ground up.
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A PBM would give Amazon access to critical patient data, medication utilization data, industry pricing data, and more. The analysts concluded that Amazon will ultimately have to partner with a PBM “As a means to navigate these challenges, we see a partnership with an existing player as the path of least resistance.”
Express Scripts CEO Tim Wentworth recently suggested that his company, the nation’s largest PBM, would be open to a partnership with Amazon.
“As I think about Amazon and what they may choose to do in pharmacy… which is, you know—becoming a PBM is a lot more than dispensing drugs,” he recently said on an earnings call. “If Amazon were looking to be an efficient provider in networks, we would welcome that opportunity.”
However, additional barriers would still remain for Amazon, according to the report. Online retailers are most popular among younger consumers, a healthier demographic that is not the target pharmacy consumer. This could lead to slow uptake of Amazon’s pharmacy business. The analysts noted that Amazon would be able to bring a new level of price transparency to pharmacy, which could counter act this “age gap” and encourage participation among older consumers.