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

[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.

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.