MIDDLEMEN WHOSE MARKUPS AMAZON CAN SEEK TO UNDERCUT.

Health said it would begin same-day delivery in several cities in early 2018, an apparent defensive move. Amazon has never commented on its pharmacy ambitions.

Drugs, which are light and don’t require in-person selection, “are a perfect match” for Amazon, said SSR Health analyst Richard Evans.

Here are six ways the retailer could overturn the American pharmacy market.

Amazon has a massive logistics operation and could easily start its own mail-based drug delivery business, cutting out drugstores or distributors in the process.

Drug delivery would also add to the value of Amazon Prime membership. Customers who pay the US$99-peryear price for Prime are its most loyal customers, and Amazon is constantly looking for ways to increase the value of membership to keep shoppers from competitors. The company launched its two-hour delivery service, Prime Now, in 2014 with inventory that overlaps with the convenience items found in drugstores. Amazon has a big emphasis on replenishment. It helps parents keep homes stocked with diapers and wipes and sells Dash buttons so you can reorder laundry detergent with the push of a button mounted to your washer.

There’s no reason Amazon couldn’t use its buying power to offer cutrate generics for cash, which would appeal to uninsured patients and those on highdeductible plans. In generics especially, there are numerous markups along the way that Amazon could eliminate or pare back to capture market share.

which already has one of the biggest mailorder operations.

One downside of an exclusive partnership is that competitors would probably bar plan members from filling prescriptions at Amazon, limiting potential customers. So instead of buying a PBM, Amazon could buy a specialty pharmacy, such as to help gain access to the fast-growing market for costly drugs for cancer, rheumatoid arthritis, and other serious diseases, according to SSR Health.

Amazon already owns wholesale distribution licences in at least 13 states and could build its own pharmacy business from scratch, restructuring the drug supply chain in the process. For now, these wholesale licences may be part of Amazon’s business-to-business sales effort, which would focus on hospitals, doctor’s offices, and dentists. In the longer term, however, the drug distribution licences could be the first step in building a hub-and-spoke model for drugs that could eventually serve consumers, Leerink’s Larsen wrote.

To become a drugstore, Amazon would also need to get pharmacy licences in states to which it wants to ship pharmaceuticals. It could hire pharmacists, allowing it to be licensed. Should it go into prescription drugs, one obvious priority for Amazon will likely be improving the consumer experience for drugs online or on mobile devices. For refills, Alexa the voice-activated virtual assistant would be just the start.

There are thousands of different drugs and dosages with prices that vary widely between drugstores and insurance plans. This makes it hard for patients to know when they are getting the best deal. Amazon could buy or partner with Rx Saving Solutions, which has an app that peers into patients’ insurance plans to help them find low-cost drugs. It could also develop programs similar to the online pharmacy startup PillPack, which presorts pills into date- and time-stamped packets for patients with multiple prescriptions.