Amazon Targeting the Transactional in the Pharma Market

Ira Studin, PhD, President, Stellar Managed Care Consulting

At some point, something new in a particular market becomes a development and, occasionally, if the development has sufficient traction, it can reshape a market. This discussion suggests Amazon’s presence in the pharma market could potentially fit that picture for the part of the market that falls below specialty products and orphan conditions.

Amazon’s healthcare business focuses on what might be called the transactional dimension of the healthcare system. It targets the time, scheduling, and financial burden patients experience. Its underlying assumption is that this burden is increasing and by leveraging its core competency in IT and operations, it can make a business by leaning into logistics to produce superior customer value.

BROAD BUSINESS OUTLINE

Two business units comprise Amazon’s healthcare business: Amazon Pharmacy and One Medical, the latter being brick-and-mortar facilities for in-person visits in roughly 240 locations, plus telehealth, video conferences, and on-demand virtual care.

While it’s reasonable to be skeptical about the brick-and-mortar business having a defining market impact, Amazon’s wager is that its pharmacy combined with virtual care options can create an ecosystem attracting growing numbers of patients because of the healthcare system’s value deficit and Amazon’s ability to deliver consumer value.

Drawing on trade press and additional discussion, consumer value is produced from the integration of four value drivers. Amazon’s logistical strengths are embedded in each of these value drivers:

• Price transparency. Consumers see upfront-pricing for a prescription drug and clinical services such as telehealth and video conferences. While transparency is a health system priority, its implementation is uneven. Given the limited pieces in the Amazon system, transparency is likely to be easy to establish and maintain.
• Pharmacy savings. There are two components to pharmacy savings: 1) Generic – for Prime members, a separate RxPass where for a $5 monthly fee consumers receive unlimited access to a broad menu of generic drugs shipped directly to their home; and 2) Brands – Amazon Pharmacy has and continues to build arrangements with manufacturers, allowing it to automatically apply coupons when patients order brand medications through the online pharmacy that adjudicates claims.
• Virtual care savings. For Prime members, a $9 monthly fee covers unlimited access to virtual care nationwide, including access to a “Treat Me Now” app.
• Seamless 24/7. Processes are designed for consumers to have digital power at their fingertips. The priority is to build immediate access, employing automation, artificial intelligence, and instant applications, so that there is maximum end-user efficiency through whatever path consumers choose.

Given the prevalence of deductibles, provider shortages, cumbersome provider phone systems, retail pharmacy waiting times, and pharmacy closures, Amazon has designed these four value drivers to improve the consumer experience in the pharmaceutical market.

BUSINESS IMPLICATIONS FOR BRANDS

From different angles, Blue Shield of California and Ely Lilly have each adopted strategic relationships with Amazon Health. This points to an element of the gig economy manufacturers can assume when evaluating how the Amazon system can benefit product growth—a different set of leverage points brands can lean into based on priorities and issues that vary by product.

Rather than seeing Amazon Health as an innovation at the fringes of the market, brand planning would be sell-served determining if the Amazon factor can add to overall strategy or if it does not apply.

Ira Studin, PhD, is President, Stellar Managed Care Consulting. He can be reached at istudin@stellarmc.com.