Goliath Meets Goliath
“Amazon.com Inc. can no longer be identified as just a retail giant,” reports Zacks Equity Research in Yahoo Finance. “Always aiming to innovate, the company now plans to explore the new territory of prescription drugs. Reportedly, the e-commerce giant is trying to figure out a way to break into the multi-billion-dollar healthcare industry.”
Currently, Amazon is underperforming in the e-commerce space, its official turf. The company’s shares have gained only 55 percent, as compared with the industry’s growth of 58.1 percent. Amazon now sells medical supplies and equipment, including blood pressure monitors, braces, hearing aids, and even walkers and wheelchairs in the United States.
Where does Amazon go from there? Getting into the pharmacy industry appears to be “a natural and lucrative next step for the company,” according to Zacks, which believes it is “unclear if Amazon would sell drugs to consumers or just act as a drug wholesaler.”
Meg Tirrell and Christina Farr of CNBC report that the massive online retailer Amazon is holding private talks with Mylan and Sandoz, generic drug producers, about becoming involved in drug purchasing. It is not known whether Amazon intends to become a wholesaler or retailer, if in fact the marketing giant enters the drug field at all.
Such a step would put Amazon into competition with distributors such as McKesson, AmerisourceBergen and Cardinal Health, among others. The investment bank Leerink informed its customers that Sandoz “met and discussed with Amazon its plans for getting into the U.S, healthcare market.”
Because of Amazon’s size and importance, there has already been a negative impact on drug distributor and pharmacy stock values. However, Stefano Pessina, CEO of Walgreens Boots Alliance, speaking at the Forbes Healthcare Summit on November 29, said, “I believe that they will not come in an industry so complicated as our industry,” Pessina said. “I believe in the end they will use their technology in a different way.”
In May, CNBC reported that Amazon was going to hire a business lead to help enter the pharmacy market. Adam Fein, president of Pembroke Consulting, estimates that retail pharmacy is a $400 billion industry in the United States.
Some pharmaceutical drug company executives, including the CEOs of Pfizer and Allergan, responded positively to the idea of working with Amazon. They also stated that no formal conversations were taking place.
Still, Amazon has already received the necessary licenses to sell medical equipment and CNBC claims it has stated hiring pharma industry personnel. Amazon has already succeeded in many industries, including book buying, retail shopping, groceries and Hollywood, using “fierce customer loyalty and enormous reach,” says Zacks, adding, “Its cloud business, Amazon Web Services, has been a key growth driver in recent times.
Now, the fight for healthcare technology dollars is on. Therefore, if Amazon succeeds in penetrating the market, it is sure to benefit and give other pharmaceutical companies stiff competition.”