Amazon, the e-commerce and cloud computing company, is looking to enter the $560 billion pharmaceutical industry in the next year or two, posing threats to current major players. The stock prices of CVS Health and The Walgreens Company dropped almost immediately after Amazon’s announcement, about 4 percent overall. Recently, analysts have claimed that they always expected Amazon to enter this industry. The company has already begun hiring healthcare professionals, according to a report from CNBC’s Christina Farr.
However, the pharmaceutical industry has multiple barriers to entry. Among them are Food and Drug Administration regulations and existing competitors who offer face-to-face interaction between patients and pharmacists, something that Amazon lacks. The fact that most prescriptions are handled digitally is a boon to Amazon. This would allow them to not establish physical locations, like drug stores, which would cost money. However, the lack of personal interaction has its pros and cons.
Studies have shown that face-to-face interactions have improved patients’ comprehension concerning how to properly ingest the drugs they have been prescribed.
Drugs cannot be treated like the common products Amazon sells, items that can be returned or exchanged, and that are not critical to people’s health and living standards. If they are to enter this market, Amazon must be willing to treat drugs with the proper care and scrutiny that they require. C. Michael White, a pharmacy professor at the University of Connecticut, holds the opinion that Amazon is not a good candidate to enter the pharmaceutical industry. Another major obstacle for any pharmaceutical company is the FDA.
As a regulatory agency, the FDA dictates how companies like CVS and Walgreens handle their operations and what drugs they can sell to the public. Amazon will have to carefully take the FDA’s regulations into consideration and measure any risks they may incur.
If the FDA demands a difficult or unpredictable change, Amazon needs to be able to react and adjust to it. The high level of complexity involved in the drug supply chain makes this difficult for long-standing drug companies, but it will be even more difficult for a company that is just entering the market and has no experience. A lack of proper cyber security practices and protocol could also become a major issue. In recent news, Whole Foods Market Inc., recently acquired by Amazon, experienced a data breach. Amazon has refused to comment on this issue. Situations of this nature occur in the pharmaceutical industry as well, and Amazon has to be prepared to respond quickly and effectively. Despite all of these challenges, there is a growing consensus that Amazon could perform quite well when it comes to healthcare. Amazon has a stellar reputation as a company. It has a large internet presence, and it is a common household name. The company already has a large delivery system in place, which puts it ahead of chains like Walgreens and CVS. It would not be a large stretch for Amazon to move from delivering books and movies to delivering prescription drugs. Currently, drug delivery services do exist, but they are mainly tailored to cancer patients and those who are suffering from more serious conditions. Amazon’s presence would expand these services to the majority of consumers, allowing those with less serious health issues to have their medicine delivered to their front door. Rob Marino, a Baruch student, likes the idea of getting his prescriptions filled online. He really likes how Amazon’s foray into the pharmaceutical industry could seriously assist others who need it.
“So many Americans are either too old or too sick to go get a prescription and something like this could be just what they need,” Marino says.
Amazon will be stating their decision by Thanksgiving this year, as stated by CNBC.
According to Fortune, the pharmaceutical industry accounts for almost 18 percent of U.S. gross domestic product. This industry also offers fairly stable and certain growth. If Amazon were to enter this industry, they could make a lot of money by tapping into an unrealized goal; delivery of prescription drugs to ordinary Americans.
The most important question concerns exactly how Amazon will attempt to enter this field. The most reasonable options include either starting from scratch or working with another company. Goldman Sachs Group Inc. analysts predict that Amazon will begin entering the market by partnering with a pharmacy benefits manager, which is an intermediary between healthcare consumers and producers, according to CNBC.
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