Amazon is hiring a business lead to figure out how the company can break into the multibillion-dollar pharmacy market.
For the last few years, Amazon has held at least one annual meeting at its Seattle, WA headquarters to discuss whether it should enter the pharmacy business, says two people familiar with the company’s plans.
But this year, with the rise of high-deductible plans and the trend towards consumers paying for health care, it is ready to get more serious.
Two people said that it’s not a done deal that Amazon will move into this space, given the complex web of established players. But it is bringing on a new general manager to lead the team and formulate a strategy, and is deep in discussions with industry experts. That hire would sit under the consumables business, the source said.
Another person said it’s started to recruit more broadly from the pharmacy space.
The company recently started selling medical supplies and equipment in the U.S., and is hiring for its “professional health care program” to ensure that the company is meeting regulatory requirements. It also hired Mark Lyons two months ago from Premera Blue Cross. A source said that Lyons is tasked with building an internal pharmacy benefits manager for Amazon employees, which might be later scaled out.
Amazon declined to comment.
Japan Times reported in April of this year that the company expanded its Prime Now delivery service to include drug and cosmetic sales, with the support of local partners. Amazon’s category page on its Japanese site now includes “pharmaceuticals,” and sells drugs to patients with approval from a pharmacist.
Amazon often tests new product lines in non-U.S. markets, before it assesses whether to roll it out in the domestic market. The company tested its secret drone-delivery program in Canada, for instance.
In the United States alone, more than 4 billion prescriptions are ordered every year. In 2015, patients, insurance companies and other payers spent an estimated $300 billion on prescription drugs.
For Amazon, it’s a lucrative market that would require navigating a variety of existing players. For consumers with a high dollar deductible, Amazon could someday be a go-to destination to shop for drugs.
“I think Amazon would introduce a lot of transparency to what drugs really cost,” said Stephen Buck, a health entrepreneur and co-founder of GoodRx, a service that promises to save consumers on the price of prescription meds. Buck sees a slew of potential opportunities for Amazon, including a product that competes with pharmacy benefits management or PBM giants, like Express Scripts and CVS Health.
Buck estimates that it’s a $25 to $50 billion market opportunity for Amazon, if executed well. But the company would also face challenges entering a regulated market it. “Prescription transfer laws and e-prescribing make a little bit more difficult than putting something in a cart and checking out,” he said.
Amazon previously backed a “dotcom” darling called Drugstore.com in the late 1990s, with CEO Jeff Bezos taking on a director role. At that time, it was speculated that Amazon could carve out a huge chunk of the prescription and over-the-counter drug sales market. Drugstore.com later sold to Walgreens, which eventually shut it down.