Amazon puts selling pharmaceuticals plan on back-burner
pharmafile | April 17, 2018 | News story | Manufacturing and Production, Sales and Marketing | amazon, biotech, drugs, pharma, pharmaceutical, pharmacy
Last year buzz about Amazon entering the pharmaceutical distribution market steadily grew after it obtained pharmacy licenses in a small number of US states.
Such was the fear the big drugstores and distributors had of a potential Amazon entry into their marketplace that some rushed to consolidate the market place.
CVS decided to seal a $69 billion deal for Aetna, one of the largest providers of health insurance in the US, while Walmart has been apparently eyeing Humana, another insurer, to keep pace with its rival.
Apparently these concerns may have been premature, as it seems that after taking a good look at the current state of the sector, Amazon has pulled back from plans to enter the space.
According to CNBC, the business section of Amazon had deemed the supply chain too complex to enter, with long-standing relationships between hospitals and providers difficult to penetrate, as well as the basic challenges facing anyone wishing to transport pharmaceuticals.
The cold chain aspect of the pharma supply chain is notoriously difficult – due to stringent regulation and the need for specialised means of transporting such goods, biologics or vaccines, for instance.
However, it is a growing market space for those already involved, with it being worth around $13 billion at present and set to grow by 10.2% CAGR through to 2022. To enter the cold chain market would have meant some serious upfront expenses for Amazon in order to cater to this side of the supply chain.
So far, Amazon Business has been focused on selling medical supplies that cover hospital’s basic needs, such as gloves and stethoscopes.
In this area though, hospitals have still been reluctant to use Amazon’s services, as it does not offer a full array of medical devices – only Class I and II, avoiding the higher risk Class III devices, which includes breast implants and pacemakers.
The CNBC report did not suggest that Amazon will not enter the space in the future, and it is clear that the healthcare area is in Jeff Bezos’ sights.
At the beginning of this year, Amazon alongside Berkshire Hathaway and JPMorgan Chase announced a partnership that would offer technological solutions to offer “simplified, high-quality and transparent healthcare at a reasonable cost”.
As yet, the independent company’s exact plans in the area are still unknown but it was enough to send shares in insurers and PBMs into a downward spiral.
However, on the release of CNBC’s report, the opposite was true – shares CVS rose by 8.7%, Walgreens was up by 6.8% and Cardinal Health rose by 6.4%.
Ben Hargreaves
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