Amazon Pharmacy, a Disruptor to the Insurance Market

This past Tuesday, Amazon announced they have opened an online pharmacy, sending ripples through the insurance industry. Stock prices for CVS, Walgreens and Rite Aid all dipped as much as 10%. I’m certain that, as with every market Amazon has entered, there will be disruption to the insurance market. Let’s dig into what we know and don’t know up to this point.

What we know

  • This is a true pharmacy designed to provide medications to patients’ homes utilizing the company’s robust logistics arm.
  • It appears that the list of medications available will be limited to brand and generic drugs (no specialty or controlled).
  • Prime members will receive a discount of up to 80% on generic medications and 40% on brand name medications.
  • Amazon will process fills through a patient’s insurance (information requested at sign-up) and will inform them if their medication would be cheaper through their insurances or buying direct through Amazon.

What we don’t know

  • While Amazon Pharmacy will accept and process claims through insurance, it remains to be seen which insurers are contracted with Amazon to be an in-network pharmacy. Consumer demand could put interesting pressure on insurers to contract with Amazon.
  • As more patients wish to utilize this new channel, Amazon’s leverage with the insurers will grow, which is likely to apply downward pressure on prescription costs. At this point, it is too early to quantify this impact.
  • Despite the opportunity to drive down costs, Amazon Pharmacy staying away from specialty medications (for now) leaves one of the biggest cost drivers unchanged. Any sort of play to manage and/or dispense specialty medications has the potential to squeeze the cost of the most rapidly growing portion of pharmacy expense in our country.
  • Where Jeff Bezos, Warren Buffet and Jamie Dimon, et, al. will go next in their bid to disrupt the healthcare space. Amazon’s logistics strength made the online pharmacy a low-hanging fruit opportunity. The possibilities seem endless, but only time will tell whether or not the group is able to effectively disrupt the medical system in the United States.

Few could argue the healthcare system in our country is working as effectively and efficiently as desired by all stakeholders, especially concerning cost. This is an exciting move in what many hope to be several productive steps to improve a system ripe for change. The First Person team is staying on top of this breaking news and will share updates as more information becomes available.

Have any thoughts on my take or of your own? Hit me up via email or LinkedIn.

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