Originally published on Aug 17, 2017. 
America and Wall Street are a bit obsessed with Amazon; in fact, Amazon was named as a threat to 15% of S&P 500 earnings calls from Q2 2017.
With that understanding, it is no surprise that the entire pharmaceutical supply chain shares similar fears.
There is an immediate threat to pharmacies and distributors because Amazon will most likely be able to outperform them with their emergence as a logistics powerhouse (soon to be almost double the warehouses than the Big 3 combined) all with best-in-class customer satisfaction. Leveraging volume is something Amazon does very well, so these companies may also be squeezed out through better pricing. Amazon also poses a threat to generic manufacturers by way of increased commoditization; with everything available to everyone at any time of the day, Amazon’s presence will significantly drive down profit margins on goods across entire portfolios.
WHY AMAZON CAN GET INTO THE PHARMACEUTICAL AND MEDICAL DEVICE INDUSTRIES
  1. An “Amazon for pharmaceuticals” is a proven concept. Simply put, aggregating distributor offers will increase competition and drive down price for the benefit of consumers. Every current platform (EzriRX being a recommended platform but also including SureCost, Pharmsaver, Trxade, RXNinja, ConceptRX and more) is proof that the business model is viable even without the resources that Amazon has – at least in terms of Amazon’s brand reputation, a war chest worth billions of dollars, best-in-class logistics capabilities and an army of both software developers and statisticians.
  2. I have personally spoken to an Amazon Product Manager that was building out their “restricted product” (physician /provider only) medical device offering in conjunction with “Business Buyer” volume discounts. He specifically mentioned Amazon customers that included “hospitals and clinics.” Amazon is continuing to build out its capability of catering to larger volume business accounts as well as a new capability of working with “restricted” and “license required” products.
  3. We have a private source of information that revealed that during their NYC Summit meeting earlier this summer, Amazon instructed key platform sellers to obtain pharmaceutical distribution licensing. Using third-party sellers to gather market data and then leveraging that data to do it better themselves, is a classic Amazon move and represents a low-risk strategy to do it right, the first time.
References:
  1. https://www.cnbc.com/2017/08/16/amazon-obsession-e-commerce-invader-fretted-about-on-15-percent-of-sp-500-earnings-calls.html
  2. http://www.ecommercebytes.com/2017/06/28/amazon-hosts-fba-seller-summit-nyc/
  3. https://consumerist.com/2017/06/28/amazon-hosts-invite-only-events-to-keep-sellers-from-defecting-to-walmart/
  4. http://www.pymnts.com/news/retail/2017/amazon-now-wants-to-refill-prescriptions/
  5. http://cdn.pymnts.com/wp-content/uploads/2017/05/Amazon-Pharmacy-PYMNTS.jpg

About Five Rivers RX

Five Rivers RX is a leading pharmaceutical compliance services firm that uses experience, relationships and knowledge to develop custom solutions for their clients. The company provides numerous services including VAWD Accreditation, state Board licensing and federal registration. Five Rivers helps third-party logistic firms, distributors and manufacturers in the pharmaceutical industry focus on their supply chain while reducing costs, enhancing efficiency and improving quality. Five Rivers is committed to helping their clients thrive and to providing peace of mind.

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