Amazon debuts online pharmacy; rivals’ stocks dip
Amazon elbowed its way into online prescription drug sales Tuesday, sending shares of giant drugstore chains plummeting over fears of new competition.
The e-commerce giant debuted the new Amazon Pharmacy a little more than two years after it acquired online pharmacy PillPack for $753 million, a deal that presaged the company’s entrance into the business. The store is available to all customers, though Amazon Prime members, who generally pay $119 a year in the United States, get two-day delivery with no added charge.
Though long expected, the announcement rattled the drugstore industry, sinking the shares of all of Amazon’s new rivals. Shares in CVS fell 8.6% in New York trading, while Walgreens Boots Alliance stock slid 9.6%. Rite Aid’s stock fell 16%.
The big chains rely on their pharmacies for a steady flow of shoppers who may also grab a snack or shampoo or groceries on the way out. All have expanded their online services and touted their abilities to deliver prescriptions and other goods as the covid-19 pandemic has pushed more consumers to stay home. But Amazon’s online store is larger, with millions of loyal shoppers already buying books, TVs and just about anything else.
Prescription drug sales will approach $360 billion this year, according to a forecast from the Centers for Medicare & Medicaid Services, an agency within the Department of Health and Human Services. With the ongoing coronavirus pandemic, Amazon Pharmacy hopes to take advantage of the burgeoning interest in shopping from home.
“As more and more people look to complete everyday errands from home, pharmacy is an important and needed addition to the Amazon online store,” Amazon senior vice president Doug Herrington said in a statement announcing the move.
Amazon Pharmacy is available, for now, to customers in every state except Hawaii, Illinois, Kentucky, Louisiana, and Minnesota, though the
company is planning to add those states in the coming year. Amazon offers a variety of pharmacy services in other countries, where regulations vary, though those businesses are separate from the U.S. prescription-drug business.
As with other pharmacies, Amazon’s service will require prescriptions from licensed health-care providers. The company said it will securely manage customer information in compliance with the Health Insurance Portability and Accountability Act. And it said it will not share information that is protected by law outside of its pharmacy for marketing purposes “without clear permission from the customer.”
The company said its online pharmacy will offer commonly prescribed medications in the U.S., including creams and pills, as well as medications that need to stay refrigerated, like insulin. Shoppers have to set up a profile on Amazon’s website and have their doctors send prescriptions there.
Amazon also said it will not sell so-called Schedule II controlled medications, which include most opioids. And Amazon will offer phone access to customer care at any time to answer questions about medications.
eligible Prime for members prescription will be discounts at more than 50,000 pharmacies nationwide, including CVS, Walgreens, Rite Aid, as well as longtime rivals Walmart and Costco. That offering is administered by Inside Rx, which provides access to medication for self-paying consumers.
For Amazon, online prescription drug sales are a way to provide another benefit for Prime members, its most lucrative retail customers. The company has said it has more than 150 million Prime members worldwide.
“Amazon Pharmacy offers yet another path to decrease churn while, at the same time, increase engagement among Prime members, ultimately resulting in further revenue upside over the next few years,” UBS analyst Eric Sheridan said in a note to clients.
Amazon Pharmacy builds off PillPack’s mail-order prescription-drug business, which had already developed much of the needed infrastructure, from negotiating with payers and benefit managers to procuring medications. PillPack’s business of helping customers manage multiple daily medications for chronic conditions will continue as a distinct service, the company said.