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Tales From the Scrypt: The Prime Fears of Amazon.com


Caitlin Sattler - October 27, 2017 - 0 comments

Happy Halloween!

This year’s spooky story concerns a terror that lurks within your home… or maybe your pantry… or could even be waiting on your doorstep at this very moment.

You are probably one of the estimated 80 million Amazon Prime members who takes advantage of its convenient two-day shipping. The online retailer offers everything from office supplies to groceries to a personal styling service for its customers. Since its humble beginnings as an online bookseller in 1994, Amazon has become a household name. Now, it may become a threat to your pharmacy.

Over the past year, Amazon has taken slow, calculated steps towards the pharmacy industry. It all began on November 15, 2016, when Bartell Drugs in Seattle announced one-hour delivery of non-prescription items via Amazon Go. One month later, Amazon conducted its first successful drone delivery in Cambridge, England. In April 2017, Amazon Japan launched its same-day delivery service for certain over-the-counter medications per approval of a pharmacist. That same month, Amazon hired Mark Lyons, a former executive of Primera Blue Cross, to direct their initiative to build an internal PBM (pharmacy benefit manager) for employees that could serve as a model for external use in the future. Since then, Amazon has been quietly hiring other candidates from the healthcare industry for a secret project codenamed “1492.” The pharmacy-centric ventures and the rumors behind 1492 may all lead to an announcement later this year of an official Amazon Pharmacy.

According to a study by Wells Fargo, an Amazon pharmacy would be well-received by patients. Five out of ten participants said they “would use or would probably use Amazon Pharmacy.” As successful as an Amazon pharmacy could be, it may have its sights set on a more profitable aspect of the industry. In his May 2017 NCPA Executive Update, Doug Hoey highlights an interesting point:  

Additionally, Amazon, like most companies, is attracted to business lines with higher margins… the average EBITDA per prescription for Express Scripts is $6.15. The closest figure to EBITDA for independent pharmacies is below $2 and the pharmacy takes on all of the risk of carrying the product, dispensing the product, counseling the patient, getting paid, assuming liability, and providing other services. For an outsider thinking about jumping into the pool, which line of business would look more attractive?[/dt_quote]

Could Amazon, an outsider to healthcare, be the disruptor that brings transparency to the PBM issue that has plagued pharmacists? Or would it prove itself to be a formidable opponent that casts a tremendous shadow over community pharmacy?

Earlier this month, Amazon confronted the pharmacy rumors and promised to release an official response before Thanksgiving. No one is sure whether Amazon will announce its own pharmacy, PBM, or other similar venture. Regardless, it’s time to prepare for when, not if, larger competitors will threaten community pharmacy.

The pharmacy industry has been around too long to be silenced by free two-day shipping. Challenging Amazon may seem like entering a fight with a slingshot and some pebbles, but community pharmacy is already well-equipped to face a giant. One of the most defining qualities of pharmacy is that technology and innovation have never made it obsolete; rather, it has evolved and improved with time and continues to do so. If you are relying on dispensing alone to keep your business going, then you should expect Amazon’s shadow (or its drones) to loom over your pharmacy.

In her member message for NCPA’s 2017 Annual Convention, Immediate Past President DeAnn Mullins reminds pharmacists of their true purpose. “The time has come to take back our profession and never forget, we are not just commodities tied to selling stuff. We are, first and foremost, healthcare professionals.”

As speculation builds and headlines continue to fuel the hysteria, use this time to capitalize your value as a healthcare professional. Let other retailers sell pills at the lowest cost as you focus on enhancing the services that set you apart from all the competitors.

 

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