SALT LAKE CITY — Speculation that Amazon would enter the pharmacy business has been confirmed by a new direct-to-consumer marketing campaign for PillPack, a pharmacy business the e-commerce giant reportedly paid close to $1 billion for last fall.
In emails to Amazon Prime members, the company is touting its mail-order pharmacy as offering both free service and shipping, saying the only cost will be for the actual medication. It also notes that a number of insurance companies have agreed to consider PillPack in-network, as have most Medicare Part D plans. PillPack is reportedly licensed for mail order in all states but Hawaii.
Brick-and-mortar pharmacies have speculated about how the acquisition could disrupt their business for months, according to HealthcareDive.com. When the deal with PillPack was formally announced in June, numerous sources said stock in existing large-scale pharmacies, including CVS and Walmart, “plummeted.”
Online pharmacies have long posed challenges for local drugstores, offering consumers a mixed bag of benefits and risks. A 2016 article in the Indian Journal of Pharmacology listed reasons consumers like ordering prescriptions online, including anonymity, ease of ordering and receiving (if you don’t mind waiting for a shipment), and lower prices in some cases because of less overhead and other factors. It’s not without challenges, though, including a patchwork of regulation, inconsistency between different online sites and questions about lower quality control in some cases.
America’s pharmacy industry is also an attractive investment. As CNBC recently reported, “Spending on U.S. prescription medications is approaching $500 billion a year and growing up to 7 percent annually, according to IQVIA, a provider of health data. Roughly 60 percent of American adults have at least one chronic illness, such as heart disease, cancer or diabetes, and 40 percent have two or more, according to the Centers for Disease Control and Prevention.”
The article noted that “Amazon and PillPack now represent a common enemy for the pharmacy benefit managers (PBMs), who worry that their position as industry middleman is threatened.” (A pharmacy benefit manager, as Edward Lamb explained for The Balance Small Business, is “an intermediary between insurers and other members of the healthcare industry. Because of their size, they can negotiate large customer contracts and negotiate with both pharmacies and pharmaceutical companies to get the best rates.”)
PillPack’s main pharmacy is headquartered in Manchester, New Hampshire, with satellite sites in several cities, while pharmacy center and corporate functions are based in Salt Lake City, according to an Amazon press release that says “PillPack was built to fix pharmacy.”
Amazon says it will do that by, among other things, packing a person’s prescriptions into time-centric doses that include each medication to be taken at a certain hour, then clearly labeling it in one handy dose-friendly package, so you have all your 8 a.m. Monday, Aug. 13 pills together, grab-and-go style, including vitamins. The company also promises to ship your refills in time and includes a label that has a picture of each medication and instructions for how it is taken.
A lawsuit filed in June offers some insight into how traditional pharmacies might react to the new service. According to Beckers Hospital Review, CVS Caremark sued to prevent a former executive from working for PillPack. A judge ruled the executive in question was covered by a noncompete clause and would have to wait 18 months before he could take a job in the Amazon subsidy.
According to writer Alia Paavola, the judge deemed PillPack and CVS competitors. “By directly contracting with health plans and employers, Amazon-PillPack may soon become its own (pharmacy benefit manager), greatly shaking up the prescription drug market,” Paavola wrote.
Meanwhile, disagreements over PillPack’s relationships have arisen. USA Today and CNBC reported in July that Surescripts, which manages a vast amount of patient prescription data, has been antagonized by PillPack’s business practices since Amazon acquired it, claiming it used a third company to illegally obtain information. Amazon fired off a cease-and-desist letter demanding the company not make such claims. Surescripts replied by complaining to the FBI.
The pharmacy service is just the latest move into health care for Amazon, according to that article: “Beyond PillPack, Amazon joined with JPMorgan and Berkshire-Hathaway to form Haven, a venture to lower employer healthcare costs. It sells six HIPAA-eligible (artificial intelligence) and machine-learning Amazon Web Services offerings, has a patent that (if successful) would allow its smart speaker to tell when users are sick from their voice patterns and offers pattern-recognition software that combs through medical records.” The company also sells glucose monitors and blood pressure cuffs.
The question is, of course, how consumers will react, including how they’ll perceive the costs, benefits and economies of scale against the convenience of leaning on the counter and asking a pharmacist about a medication’s side effects as you’re dropping off the prescription. Although answering that would be speculative at this point, there’s no question that Amazon is continuing to find ways to disrupt and impact a great number of retail stores nationwide, redefining to some degree what it means to “shop.”