Amazon might disrupt healthcare quicker than you think
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Amazon might disrupt healthcare quicker than you think

If you’re a regular reader of this newsfeed, you will already know that Amazon is making a play for the online pharmacy industry. Given its proven ability to disrupt businesses (anyone remember independent bookshops?), and its growing brick-and-mortar retail network (thanks, Whole Foods), who knows where that quest could end? However, thanks to a recent report from analysts at Jeffries Group, one thing we do know is that it could happen quicker than many expect.

Amazon’s share price has risen by 48% so far this year

graph 1007 amazon

SOURCE: Yahoo Finance

Last week, Ecommerce titan Amazon announced that it was acquiring PillPack, a pharmacy company that will let it enter the U.S. prescription drugs market. However, the company’s healthcare ambitions didn’t start there. Founder and CEO Jeff Bezos previously collaborated with other billionaires to innovate the way healthcare is delivered to his, and their, employees. And, more importantly for the current discussion, Amazon started selling non-prescription drugs last August under the branding “Basic Care”.

The Basic Care line, which is the subject of Jeffries report, debuted with 35 products, ranging from mild painkillers to cold medicine, and now numbers 65. It now includes most types of over-the-counter medicines you can think of, and – according to Jeffries – is selling them at a significantly lower cost than its competitors.

Analysts said Amazon’s medications cost around 20% less than those of Walgreens Boots Alliance Inc. and CVS Health Corp. In many cases, the difference is more significant. Jeffries says that 84% of Walgreens’ and 72% of CVS’s in-house non-prescription drugs were more expensive than Amazon’s Basic Care line. Many of Amazon’s offerings have the added benefit of being available through the company’s Prime scheme, which also means Ecommerce shoppers can get them quickly, and with no added shipping cost.

None of this, of course, guarantees anything about Amazon’s wider plans in the sector. But, if its pricing strategy with prescription drugs follows a similar route (and remember, Bezos has specifically called out drug makers over pricing), and it leverages its Prime scheme to make them quickly and easily available, then the pharmaceutical industry could have one hell of a fight on its hands.

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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