latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/amazon-may-be-primed-to-disrupt-healthcare-space-eventually-62036459 content esgSubNav
Log in to other products


Looking for more?

Contact Us
In This List

Amazon may be primed to disrupt healthcare space, eventually


OTT players find great value in partnerships but still prefer direct-to-consumer


Episode 10: Cloud Pricing & Complexity


Tracking Credit Risk at a Major U.S. Retailer


Global console, mobile and PC gaming drives $175B in content revenue in 2020

Amazon may be primed to disrupt healthcare space, eventually

Analysts believe Inc.'s new online pharmacy platform has the potential to disrupt the healthcare market, but it will not challenge managed care insurers and their pharmacy benefit management operations in the near future.

The online retail giant launched Amazon Pharmacy in mid-November 2020 with an eye on expanding its move into the healthcare space through the sale and delivery of prescription medications. Among the features of the program are free two-day delivery for Amazon Prime subscribers and savings for people without insurance, both online and at participating retail chains such as CVS Health Corp., Walgreens Boots Alliance Inc. and Rite Aid Corp.

Amazon's move, which comes as the pandemic has pushed people to rely more heavily on the internet, including for their prescription needs, could be "quite disruptive," in the long run, CFRA Research analyst Sel Hardy said.

"It will capture some market share from existing players but it won't happen right away," Hardy said in an interview. "It will take time for people to form habits and get used to Amazon Pharmacy."

Amazon obtained its prescription savings program via a partnership with Inside Rx, a noninsurance prescription savings service run by Cigna Corp. subsidiary Evernorth Health Inc. The company's health services segment was formed after Cigna purchased Express Scripts Inc. in 2018.

Hardy said establishing that kind of partnership with other managed care companies could be the key for Amazon Pharmacy's growth.

"Amazon already has a great infrastructure and delivery system and they could use Amazon Prime for delivery," the analyst said. "I think there could be advantages for both sides."

Growth also could turn into a roadblock, according to Cantor Fitzgerald analyst Steven Halper, who pointed to Amazon's 2018 purchase of online pharmacy PillPack Inc. as an example.

Halper said at the time of the purchase, PillPack was in the network for PBMs. But as it started getting bigger and bigger, the PBMs could just take them out of the network.

"That's still the case, especially with the new online initiative," Halper said in an interview. "Any company that has mail-order is going to be very, very protective of that mail base."

Customers can get prescriptions filled by Amazon Pharmacy the same way they would at brick-and-mortar pharmacies. It accepts most insurance plans and prescriptions are submitted by medical professionals, or customers can choose to go without insurance and get a copay price.

Halper said unlike insurers and PBMs, Amazon does not have a connection to employers that provide insurance for their employees, and that is what the e-commerce giant's pharmacy initiative may need to be successful.

"If you're looking to compete with the PBMs, the thing that matters most is the corporate relationship," Halper said, "And the last time I checked, Amazon retail doesn't have that employer aspect of the equation figured out."

Hardy is interested in seeing if Amazon Pharmacy becomes a topic of discussion during managed care companies' fourth-quarter 2020 earnings calls. So far, there has not been much commentary on Amazon's venture, and she will be keen to hear from managed care players if they consider it a threat and are developing any strategies to counter the new entrant in the market.