Amazon will be adding to their healthcare and pharmacy play with the acquisition of PillPack.
The Awkward Third-Wheel: Walmart with Amazon & PillPack
It was all but confirmed in early April 2018 that Walmart would be acquiring PillPack (see our article here
) for just under $1 billion. The news created waves at that time specifically because a Humana tie-up was also rumored – combining the three (Walmart Retail, PillPack Mail Order/Long-Term-Care, and Humana Mail Order) would present a significant presence in the pharmaceutical supply chain. However, it looks like Amazon swooped in before any binding agreements were made to win the deal.
PillPack Prime Prescriptions
Upload your prescription, one-click payment, an Amazon pharmacist approves prescription and, potentially, have it delivered two hours later with Amazon Prime Now. Sound pretty good? Now remember that Amazon will be able to eventually muscle their way to the best prices available in the US with their volumes, alongside their already impressive logistics to push down the price further. This service is already available in Japan, as reported by the Japan Times in April.
Background: Five Rivers RX Covers Amazon Potential Plays
Future of Healthcare: With PillPack, Amazon’s Healthcare Trio is Ready to Disrupt
This news is sure to be enormously disturbing to the massive, vertical oligopolies forming such as (1) Cigna-Express Scripts; (2) UnitedHealthcare-OptumRx; (3) Aetna-Caremark-CVS-Red Oak (Cardinal); (4) Walgreens-Amerisource. These companies had been looking vertically to protect their business model and keep consumers flowing through. Possibly, these moves were made because of Amazon – the big chain retail pharmacies & PBMs could potentially use the tie-ups to lock Amazon out of the supply chain through coverage and reimbursements. However, it seems like Amazon has a plan.
In January, Amazon, J.P Morgan Chase, and Berkshire Hathaway announced a joint venture that would “drastically reduce” cost of medical services for employees because the venture would be “free from profit-making incentives and constraints.” This venture has unlimited potential (or at least potential greater than the $3 trillion dollar annual US healthcare expenditure). Following what Amazon did with AWS, it will likely develop the medical benefits program in-house and perfect it – then offer it to the rest of the world. Just for scope, AWS dominates the cloud industry with over 30% of market share while achieving a segment profit of $4.3 billion in 2017.
The Amazon Healthcare Trio will potentially be a (pardon the cliché) disruptor: if Amazon is able to control the consumer through benefits administration, they could “skip” the massive oligopolies (PBMs and insurance companies) that stand in the way between patient care and patient dollars. By offering healthcare services to consumers. negotiating directly with healthcare providers, and utilizing Amazon’s new pharmacy, the entire healthcare model instantly becomes more streamlined (Figure 1 versus Figure 2). In conjunction with PillPack, Jeff Bezos can only be summed up in one word: genius.
Traditional Supply Chain
Amazon’s Supply Chain
Amazon’s Healthcare Trio Recent Developments
Development continues to push on for Amazon’s Healthcare Trio. On June 20, the Amazon Healthcare Trio announced that they would hire Dr. Atul Gawande, a professor and practicing Harvard surgeon who also writes for the New York Times.
We will keep you updated as we hear more!
Based just outside of Philadelphia, Five Rivers RX provides actionable guidance and excellent administrative services with a focus on client care across Compliance, Commercial, and Quality solutions. Our mission is to improve the health and welfare of the American public by providing solutions and implementing best practices for companies in the pharmaceutical supply chain.