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Amazon Rx Disrupter – WSJ



Amazon has redesigned retail by acquiring the Apple founder

Steve Jobs

The dictum to show consumers what they want before they know they want it – and then bring it to them quickly. CEO

Jeff Bezos

Now he is betting that he can use this strategy to disrupt the pharmacy business that could benefit the competition.

This week, Amazon has announced that it will pay $ 1 billion for online pharmacy PillPack. The five-year-old startup sorts the prescriptions by dose and provides labels and instructions for patients with a picture of each pill. This is a stroke of luck for patients with chronic illnesses who have difficulty following a regime. Think of the 85-year-old with high cholesterol, anemia and arthritis.

Amazon's deep business bags will enable the young company to expand its innovations. PillPack employs about 1

,000 people compared to the 235,000 employees of Walgreens, the giant drugstore chain. The startup needs more scale to compete with pharmacy giants and negotiates with benefit managers who act as intermediaries with insurers. Both sectors have consolidated.

Walgreens bought 2,000 Rite Aid stores last year, while Albertsons announced it would absorb the remaining 2,600 in February. CVS acquired Target's pharmacy business in 2015. The $ 68 billion offer to health insurer Aetna will drive millions of customers to its retail stores and clinics. The three big pharmacy utilization managers

Express Scripts

CVS Caremark

and United Health's OptumRx control 70% of the market and operate their own specialty pharmacies. This makes it harder for PillPack to expand, but support from Amazon will help.

Amazon will obtain a pharmacy license in 49 states and avoid regulatory deficiencies. The retailer in Seattle has previously shown interest in the pharmacy business and acquired wholesale licenses in several states, but the bureaucracy has ruined its expansion.

PillPack's pharmaceutical expertise, combined with Amazon's logistic control, should enable patients to receive medicines faster and cheaper. Patients or their caregivers could simply fill up on recipes by asking Alexa. Drug manufacturers experiment with digital sensors embedded in pills to track adherence. One day Alexa might get an Alzheimer's patient to take her pain medication

Amazon's immersion in the business has already spurred pharmacies to improve service, and they'll need to increase their game even more. CVS announced a deal this month with the US Postal Service to deliver prescriptions to customers for $ 4.99 in one to two days. But what if Amazon can deliver recipes for free within hours?

Coincidentally, Amazon announced this week that it would enter into contracts with small businesses to accelerate deliveries. Amazon ships about 1.2 billion parcels per year and has more than 100 million Prime subscribers who receive a two-day free shipping. The online retailer also offers two-hour shipping and extends its fresh deliveries.

Even though Amazon is pushing into new industries, it is trying to break away from competition from stationary retailers like Target and

Walmart

who are fast expanding their online sales. But the US Postal Service,

FedEx

and UPS can not deliver packages in hours, as many Amazon customers can expect. Contracts with small businesses could speed deliveries and reduce costs.

We have criticized Amazon's e-book monopoly that the US Department of Justice has helped block Apple's competition. But his entry into drug delivery is a welcome disruption that could benefit consumers.

Published in the printed edition of June 30, 2018.


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