06/16/2017

Could An Amazon Pharmacy Be A Prescription For Disaster?

4:28 minutes

Credit: Shutterstock

These days, you can find just about anything on Amazon — from toilet paper to textbooks and even groceries. For now, though, there’s still something you won’t find on the site: prescription drugs.

But earlier this year, Amazon hired Mark Lyons, a veteran of the pharmacy and health care industries. Some analysts are speculating that the distribution giant is considering the pharmacy business, and in mid-June, news of Amazon’s deal to acquire Whole Foods dealt a blow to pharmaceutical stocks.

“[Amazon is] working behind the scenes, pretty much, to figure out what to do,” says Stat News senior writer Ed Silverman, who has covered the story on his Pharmalot blog. “I think it’s something they’ve been looking at for a while, but I think they’re taking their time.”

The online retailer hasn’t commented publicly on its plans, but Silverman says if the company does start selling prescription drugs, it could shake up the industry. He points to a recent Wells Fargo survey, which found that 5 in 10 US adults would use or probably use an Amazon pharmacy. “The expectation is based on a perception that Amazon will get them a better deal than they’re getting now,” he says.

[The cost of co-pay drug coupons.]

“First of all, Amazon is all about disrupting businesses, existing industries, where they decide to target their efforts to enter and try to grab market share,” he explains, “and do that, of course, in a big way.

“So, they could disrupt the existing business models simply by bulking up over time and leveraging their clout … to try to get better deals for the medicines that they would sell — presumably online, although they just bought Whole Foods, so maybe they’ll get into bricks-and-mortar pharmacy at some point, too.”

The fact that Amazon is also rich in data wouldn’t hurt, he adds. “Their ability to fine-tune data would give them presumably more leverage when it comes to negotiating with drugmakers and with health plans that then, of course, would be purchasing the medicines.”


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But there’s another way Amazon could make waves in the drug industry, Silverman says — and that’s if it gets into the big business of pharmacy benefit management. That’s a different role than selling medications through mail order or at a local drugstore, he explains. “You’re behind the scenes negotiating with the drug company for a good deal and … helping set the list of preferred drugs for insurance coverage.”

According to CNBC, Lyons was reportedly hired to build an in-house pharmacy benefit manager for Amazon employees — which could later be repackaged for the outside world.

“If Amazon gets into that business too, well, then they have the possibility of disrupting a whole set of ways of doing business that — right now, by the way — are under attack increasingly across the country and in Washington,” Silverman says.

—Julia Franz (originally published on PRI.org)

Segment Guests

Ed Silverman

Ed Silverman writes the ‘Pharmalot’ blog for STAT.

Segment Transcript

IRA FLATOW: And now it’s time to play good thing, bad thing. Because every story has a flip side. Now, you know you can buy just about anything you need on Amazon. Toilet paper, books, a waffle iron, sweat pants. So you continue shopping, right? You can do it right from your couch. And today, the company announced it’s buying Whole Foods. But the one thing you can’t buy on Amazon are prescription drugs.

Earlier this year, the company hired Mark Lyons, who has worked in the health care and pharmacy industries. And this set off speculation that the online giant was looking into getting into selling prescription drugs. So, would Amazon, as an online pharmacy, be a prescription for disaster, or could it be a drug disruptor? My next guest is here to break this down. Ed Silverman is senior writer and Pharmalot columnist at STAT News. Welcome to Science Friday.

ED SILVERMAN: Hi. Thanks for having me.

IRA FLATOW: Has Amazon made any comments about their intentions to get into the pharmacy business?

ED SILVERMAN: No, they’ve been very low-key, actually. They’re working behind the scenes, pretty much, to figure out what to do. I think it’s something they’ve been looking at for a while, but I think they’re taking their time. As you just mentioned, they’re getting into food now in a much bigger way. So, this is definitely on their radar.

IRA FLATOW: Mm-hmm. Now let’s talk about possible good news about this. You know, we talk about how expensive drugs are. Amazon buys stuff in giant quantities. Could they actually, if they sell hundreds of thousands or millions of prescriptions, could they actually help drive down the price of drugs by having a better negotiation with the drug companies?

ED SILVERMAN: Well, there are a couple of ways they could do that, yes. First of all, Amazon is all about disrupting businesses, existing industries. Where they decide to target their efforts to enter and try to grab market share and do that, of course, in a big way.

So they could disrupt the existing business models simply by bulking up over time and leveraging their clout at that point to try to get better deals for the medicines that they would sell, presumably online. Although, they just bought Whole Foods, so maybe they get into brick and mortar pharmacy at some point too. But just by pure old-fashioned clout, they could do that, and certainly they have different resources.

Not just financial but in terms of data, which is another way they could actually go ahead and change things around. Because their ability to fine-tune data would give them more– presumably more– leverage when it comes to negotiating with drug makers and with health plans. That then, of course, would be purchasing the medicines.

IRA FLATOW: So what’s the downside, the possible downside of this?

ED SILVERMAN: Well, if you’re a consumer, there may not be any downside initially. Because, if you have a big player or have a big company that wants to become a big player in this market, there’s the possibility that you would see better prices down the road. Wall Street analysts recently did a survey and found that five in 10 US adults said they would use or would probably use an Amazon pharmacy.

The expectation is based on a perception that Amazon will get them a better deal than they’re getting now. Now, if you’re one of the existing behind-the-scenes players, which is known as a pharmacy benefit manager, that’s a different role than selling medicines either by mail order or through a local drugstore.

You’re behind the scenes negotiating with the drug company for a good deal and this pharmacy benefit manager is helping set the list of preferred drugs for insurance coverage. Well, if Amazon gets into that business too, well, then they have the possibility of disrupting a whole set of ways of doing business. That, right now, by the way, are under attack increasingly across the country and in Washington.

IRA FLATOW: I have to I have to interrupt. We’ve run out of time. I’m going to thank you for taking time to be with us today. Ed Silverman is senior writer and Pharmalot columnist at STAT News.

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