Amazon Is Headed For the Prescription-Drug Market, Analysts Say (bloomberg.com)

An anonymous reader quotes a report from Bloomberg: Amazon.com Inc. is almost certain to enter the business of selling prescription drugs by 2019, said two analysts at Leerink Partners, posing a direct threat to the U.S.'s biggest brick-and-mortar drugstore chains. "It's a matter of when, not if," Leerink Partners analyst David Larsen said in a report to clients late Thursday. "We expect an announcement within the next 1-2 years." Amazon has a long standing interest in prescription drugs, an industry with multiple middlemen, long supply chains and opaque pricing. In the 1990s, it invested in startup Drugstore.com and Amazon Chief Executive Officer Jeff Bezos sat on the board. Walgreens eventually purchased the site and shuttered it last year to focus on its own branded website Walgreens.com. Leerink's calls with industry experts suggest that Amazon "is in active discussions" with mid-size pharmacy benefit managers and possibly larger player such as Prime Therapeutics, Larsen's colleague, Ana Gupte, wrote in a separate report Friday. On Friday, CNBC reported that Amazon could make a decision about selling prescription drugs online before Thanksgiving.

Comments

can't be members only and no extra fee for non-mem

[Joe_Dragon]

can't be members only and no extra fee for non-members.

So they really can't offer stuff there as prime only.

Stolen meds on the way!

[ELCouz]

I can see meth labs profiting of this great opportunity!

Why they bought Whole Foods

[rtfa0987]

That's why the bought Whole Foods. Whole Foods does an enormous business in herbs and other pseudo-medications that are supposed to help with everything from angst to virility. They even have a huge book about this stuff mounted on a lectern in every store. Many medications can't be shipped in the mail because they can be stolen or require temperature control. The crooked, multi-level, high-markup drug industry deserves disruption.

Re:Why they bought Whole Foods

[sexconker]

Unless Amazon manufactures the drugs, there will be no disruption. And unless Amazon secures the patents to newer drugs, or invents their own, there will be no major disruption.

Re:Why they bought Whole Foods

[NicknameUnavailable]

The crooked, multi-level, high-markup drug industry deserves disruption.

Not just to play Devil's advocate, but they already have disruption, that's why they do what they do. It effectively plays out like this:

• A researcher or a few get an idea for a medicine or where to look for a medicine, they get funded from friends and family to the tune of 5-6 figures to fuel their research.
• If the research proves successful they start seeking higher levels of investment for animal trials, somewhere from 7-8 figures, this tends to come from VC.
• If the animal trials work out they're effectively at a federal roadblock, because the regulations ensure Human trials cost on the high end of 9 figures, sometimes even 10. This means the only option is to aim for a buyout from one of about 70 major pharmaceuticals to have the research completed.

Those ~70 major pharmaceuticals have long since given up their own internal R&D operations because it isn't profitable, because the lifetime of something which actually makes it to becoming a drug goes roughly like:

• Drug is created for 9-10 figures in all.
• Company has a monopoly on that drug for a bit under 20 years (usually 12-14 because the drug needs to be patented before clinical trials which usually run 6-8 years when they don't get stopped short due to it not working out.
• Combine that with the cost of drugs which don't make it to market and you have the actual costs of the R&D effort (which thanks to the thousands of little companies each aiming for 1 specific thing, does reduce the R&D cost to a manageable level, but still not significantly.)
• After that monopoly period expires everyone and their brother can take on the minimal manufacturing costs (usually about a fraction of a penny for a month supply of whatever it is for one person) and compete to drive the price down to basically include manufacture and distribution with little to no overhead depending on their business strategy.

This equates to one simple thing: They have at best 12-14 years to make up hundreds of millions of dollars to billions of dollars in R&D costs for every single drug they make. If they don't do that they go out of business and make zero drugs, it's that simple.

If you want to look at the parts of this process where you might actually get the costs down, look at the regulations - that's where most of the money actually goes.

I don't see any chance for disruption here

[rsilvergun]

it's just another seller. Big whoop. Disruption would be single payer healthcare or being able to buy from Canada. Given how few drug makers there are (especially for the important stuff) adding a few more places to buy meds from won't make a lick of difference.

Re:I don't see any chance for disruption here

[rtfa0987]

The pharma distributors like McKesson take a big cut. Getting them out of the picture would be a discruption.

Re:I don't see any chance for disruption here

[Anonymous Coward]

"it's just another seller. Big whoop."

Maybe. You might be right. It'd be like Amazon and the shoe industry, where Amazon doesn't really do much and they are middling.

otoh, there are 2 major tracks they could disrupt--Amaon is also one of the most valuable companies out there that once they get a taste, could go on a buying spree of patents and companies and facilities worldwide. We already saw what Shkreli did, and his funding, knowledge, and points of focus would pale in comparison to a half-assed assault Amazon could easily try.

Keep in mind, some of the drug costs are so high these days compared to 20 years ago for the same medication, Amazon could buy up companies in separate divisions, cut out the rx managing contracts, and make a killing with the customer base they have and would acquire from drugs alone. Remember, this is an over $300billion a year market they don't currently even touch. Some base brand name drugs with the same formulation have gone up $90 for a 90 day supply; they acquire one of the 3 major companies in there, slash the price to a half, that would get people to shift, hard.

The second area is making a straight up level playing field--Sometimes a big stick in the background with a centralized marketplace is all you need for upfront and fair pricing to come to bear on tablet form rx's. One of the major areas that the health industry screw people over is the unclear pricing, whether by hospital, by insurance plan, by geographic area--Amazon could start to obliterate that.

Re:I don't see any chance for disruption here

[TechyImmigrant]

I see a little disruption.

Every time I go to a pharmacy, they make you wait 15-30 minutes after giving them the prescription, to force you to walk around their shop so you might buy more stuff. I would much prefer to get them delivered Amazon style than waste my time at a pharmacy.

However much bigger disruption would happen if you could mail order them from abroad at the much lower prices they are outside the US.

Re:I don't see any chance for disruption here

[torkus]

That would be disruptive, but not something amazon can do. It's illegal and amazon is WAY to big to fly under the radar.

*however*

They ARE big enough to work on forcing through legislation to permit it legally or using other loopholes to legally import those drugs en mass.

Re:I don't see any chance for disruption here

[TechyImmigrant]

There are already online, mail order pharmacies. So how is it illegal? My own employer insurance tries to push me to use their preferred mail order vendor, I presume because someone is getting a kickback.

The problem with them is that they are incredibly shit in every way so no one wants to use them.

Amazon is demonstrably good at selling and delivering stuff. An online pharmacy that didn't suck would be a good thing.

I welcome our Amazon drug selling overlords. First prescriptions, next recreationals!

I am

[DaMattster]

sick and tired of the fucking Amazon brand! Is anyone else with me?

Re: I am

[Anonymous Coward]

No, I'm tired of my asthma inhaler costing $375 / month ( one inhaler ) without insurance. One of many meds I take daily.

If they can bring the cost down, then I'll happily cheer them on.

Re: I am

[Anonymous Coward]

You do realize those things cost what they do because of insurance? If everyone had to pay out of pocket for all this stuff it would have to be affordable, or the company would go out of business when no one buys it. 'Insurance covers it' is why everything pharma-related is so expensive, because it can be. Everyone is paying for this, since insurance spreads the greed out. No I don't have a realistic solution, sorry.

Re: I am

[torkus]

Most companies to not intend for people to buy their drugs out of pocket and have rebates/coupons/etc. to greatly lower the cost for those who do.

Same thing with the stupid epi pen. The OOP cost is something no individual should ever actually pay. They charge that so insurance companies and institutions fork over big bucks and then they have tons of discounts for individuals. Granted it's still a scam but let's look at the reality, not what insurance companies pay on your behalf.

It does amaze me that they don't blink at $10,000's in meds but then don't approve tests and proceedures that would fix problems :)

I can see it now

[93 Escort Wagon]

I can't wait until the first time some guy goes to show his friend something he found on Amazon and is greeted with a section "people with erectile disfunction also often buy...".

Re:can't be members only and no extra fee for non-

[Anonymous Coward]

For Costco and Sam's Club, they can't prohibit entry if you say that you want to go to the pharmacy.

Drug maker or seller?

[RandCraw]

The article talks about Amazon's desire to compete with pharmacies, but the Bloomberg title (echoed verbatim by Slashdot) states Amazon wants to 'enter the prescription drug market'.

That wording is confusing. It implies Amazon wants to make AND sell prescription drugs -- the prescription drug market -- which is only half true.

Why not just say: "Amazon: Your Next Pharmacy"?

Embrace, Expand, (Extinguish), Embrace...

[Whibla]

Over the past few years I've watched with a kind of sickened admiration as Amazon has grown from an online bookstore to a purveyor of 'all things'. Really, their expansion to a definitely-not-a-monopoly player within a market, their subsequent embrace of another market, followed by expansion within that market, and so on, is a thing of beauty. In a sense it's been like watching the growth and evolution of a living organism.

One perfect example of this effect hit the news only the other day: After its retail sales had reached a certain size it made perfect sense, from an economies of scale perspective, for it to start performing its own logistics and deliveries to the detriment of long standing logistics companies. The obvious end point, again benefiting from economies of scale, is to then actually enter the logistics business.

I can't help feeling like a bit of a doomsayer here, but we all know the step that follows embrace and extend.

I suspect that I know what some of you are thinking right now: Amazon is not a monopoly. Amazon has tons of competition. Amazon isn't anything like Microsoft. Amazon doesn't even make a profit. (I could go on, but I'll save us all the time...)

I know Amazon is not a monopoly, any more than (another perfect example of the strategy) Google is. They're very cleverly making sure of that. Any time they're in danger of being considered a monopoly they simply expand into another market and bingo they're in competition with dozens of other players. As this market consolidates, or rather as Amazon (or Google) grows into the main player in this market, they expand into another.

I must admit though I hadn't thought of prescription drugs (although I had wondered about when or if they'd start selling pot - in the US at least) as one of their next markets. Somewhat blinkered there. And I'd actually thought they'd go with fairly high quality frozen ready meals first, rather than outright buy a supermarket chain. Just goes to show I wasn't thinking Bezo's-big enough.

^ And it's this last thought that's starting to worry me!

There's no need

[kilodelta]

Because you can get prescription drugs on Amazon without a prescription now.

Could have huge benefits

[sabbede]

One of the big problems in health care is that most consumers have no idea how much anything costs because insurance masks prices. Having Amazon butt in could help repair the broken market feedback mechanisms that keep costs in check, doing far more good for consumers than any feedback-breaking government "help" ever could.