Amazon Shelves Plan To Sell Prescription Drugs (cnbc.com)

Major Blud writes: CNBC is reporting that Amazon Business, which considered selling pharmaceutical products last year, has put its plans to do so on hiatus. "The change in plan comes partly because Amazon has not been able to convince big hospitals to change their traditional purchasing process, which typically involves a number of middlemen and loyal relationships," reports CNBC. Amazon was able to gain licensing in 47 out of the 50 U.S. states, but has struggled to land contracts with large hospital networks. "The setback illustrates the challenges of getting into the medical supply and pharmaceutical space, even for a company as big as Amazon," reports CNBC. "Several health-care and pharmaceutical distribution companies saw their stock take a nosedive following recent reports of Amazon potentially getting into the space, but it will likely take some time before those concerns turn into real threats."

Comments

Hospital is a middle man

[kiviQr]

Hospital is a middle man - they get markup on what they sell. They have no incentive to lower that cost. Your health insurance and you in the end pay for it!

Re:No incentive for the hospital

[93 Escort Wagon]

Hospitals (for civilian non-veterans) in the USA have no incentive to be efficient. They can put whatever number they like on the invoice and they'll likely get paid.

Having dealt with numerous hospital and doctor bills over the past couple decades, I can state with confidence that you're quite wrong.

The hospitals and doctors may bill for a particular amount; but how much they actually receive depends on a rate negotiated with each insurance company. So when you look at a doctor's bill for example, you might see:

2018-02-25 Brain Transplant $100000.00
2018-02-27 Insurance Write-off -55000.00
2018-02-27 Insurance Paid 43000.00

Your Responsibility: $2000.00

And on the insurance statement, rather than the "write-off" amount you'll see "allowed: $45000".

For the most part it's the insurance companies and government programs like Medicaid which decide how much the doctors and hospitals are going to actually get paid. And it's actually pretty rare for the original amount billed to not get adjusted to some degree - sometimes drastically.

Re:No incentive for the hospital

[MMC Monster]

I'm not sure if I believe this.

As a physician employed by a fairly large hospital network, I know that my hospital pinches any penny they can.

If they can get 1 cent less per acetaminophen tablet, they would sell their own mother for the opportunity.

Not that they will pass that savings on to the consumer. But it will increase their margins so that they can afford to buy more stuff.

So I can't believe Amazon.com is giving up on this.

The only thing I can think is that the hospitals have multi-year contracts that need to run out and Amazon wasn't willing to wait.

So much for draining the swamp

[Applehu Akbar]

If the putative swamp-draiing team in Washington had put John Stossel in charge of the FDA and turned Amazon loose with the ability to buy medications in bulk on the world market and fill US prescriptions for less, Trump's second term would be assured. But apparently, nothing this rompingly popular is even under consideration by the 'populists'.

If anything, the pond scum is getting deeper.

Re:So much for draining the swamp

[TechyImmigrant]

This isn't about selling to consumers like Walmart does. Amazon couldn't compete with the companies that have been selling in bulk to hospitals for many, many years.

Which is a shame. Having the doc E-sign a prescription and the meds automagically popping up in my Amazon cart and auto charged against my HSA with prime shipping would be several billion times better than schlepping to Walgreens and waiting while they force you to spend 20 minutes in their store in the hope you buy something.
   

Re:No incentive for the hospital

[stephanruby]

Also, since Amazon is being targeted by President Trump right now, it's probably better that it waits until he leaves office. Starting a new business venture in pharmaceuticals when a branch of the government is out to get you is a very bad idea.

Disappointing

[cascadingstylesheet]

More competition in this space would be good. It's disheartening that such a big player as Amazon can't break in.

Why would Amazon be good for this?

[Actually, I do RTFA]

Amazon is pretty good at consumer delivery, but they're B2B service for repeated mass deliveries doesn't really exist yet. Nor is it in their area of competency. Those supply chains are already pretty well optimized, the ordering will be done via boring forms (for legal reasons), and there's no upselling/tracking of people's desires, and things are moved by the box, not the item. Also, big hospital chains already get bulk discounts.

My guess is they really just weren't able to compete on price and service, not that "there are longstanding relationships that made hospitals decide to lose money.:

Re:No incentive for the hospital

[bestweasel]

And yet,
States consider bringing prescription drugs from Canada to US as costs soar

Sovaldi [a hepatitis C drug], is a good example of how prices can vary between countries. In the US, a course of Sovaldi lasts 12 weeks and costs $90,000 US retail.

American insurers typically negotiate a discount of 41%, according to a Bloomberg News analysis. That puts the cost of the drug at $17,700 a month in the US.

But in the United Kingdom, that drug costs $16,770 a month, and in Canada $14,493.

For an even more dramatic example, consider Gleevec, a leukemia drug. It costs $10,122 in the US, $2,645 in the UK, and $2,420 in Canada.

“Our Medicaid drug prices, particularly for specialty drugs, are way over the top,” said Lyons. “So, we’re trying to identify those drugs where the cost has escalated in the past few years, or the payment per dose is very high as compared with Canada.”

...

Americans pay on average three times more than British people for top-selling prescription drugs.

How many people have to pay the retail price?

Average foreign-to-Canadian price ratio for patented drugs as of 2016

It looks like the drug companies charge what they like because the market in the US is fixed.
Are Canadian Pharmacies the Solution to America's High Prescription Drug Prices?

This is what’s at stake if U.S. drug prices fall — and Europeans don’t pay more

Our calculations suggest that the U.S. market accounts for as much as 78% of all global drug profits. These are the profits that drive innovation, and they are coming out of American wallets.

Why does this happen? Branded prescription drugs are 20% to 40% cheaper in Europe in large part because the national health plans there drive hard bargains. The state-run buyers can impose price caps, or even refuse to allow a drug onto a national formulary if they think it is not worth the cost.

Bargaining does occur in the free-market U.S., but not nearly in such draconian terms. Medicare was expressly forbidden from bargaining when the drug benefit was added during the George W. Bush Administration. If the Food and Drug Administration approves a drug and a physician prescribes it, Medicare will almost always cover it. Private insurers and pharmacy-benefit managers can usually negotiate down from sticker prices, but they typically don’t have the European-style ability to broadly deny access, which is the big bargaining chip.

Re:No incentive for the hospital

[tlhIngan]

It looks like the drug companies charge what they like because the market in the US is fixed.

No, it's because in Canada and Europe, the state buys from the drug companies. When an entire country is buying the drugs, they buy in bulk because they're buying for everyone in the country. This sheer buying power means they can demand good pricing for drugs. (In Canada, it's actually bought at the provincial level, but many provinces have joined forces to group buy the drugs, again, because it increases their leverage and buying power).

In the US, pharmacies pretty much have to fend for themselves. Sure, the hospitals often have more buying power, as are chain pharmacies, but when you've got basically no buying power at all (what, you don't want to pay? Well, your customers can go across the street to the pharmacy that carries the drug instead), prices get jacked up.

And let's not forget it's the state that also sets the laws regarding generic drugs and such - it's a very powerful weapon when you can ask, but you can't ask too hard because your monopoly is dependent on your customer. Sure the companies can bitch and whine all they want about withholding drugs and such, but it's a threat they rarely follow through because it means forgoing a lot of money now just to make a point, without saying there aren't going to be other companies willing to fill in the gap and undercut you.