Amazon is stepping into the pharma business
Our expert's opinion
"The delivery giant Amazon just acquired PillPack, an online pharmacy service, for $1 billion. This service is mainly used by patients that need to take a lot of medicines everyday (5 different pills a day, for instance) and are struggling between their refills, the numerous trips to their local pharmacy and the dosage. PillPack is taking care of everything for them. Every month, the patient receives his correct daily-dosed medications at home. At the moment, the system is only available in the US, but the concept is definitely going to be expanded to our shores.
With this merger, Amazon makes its first step into the pharma business, and it is a big one. Is this going to disrupt the whole industry? That is the question I want to know the answer to."
- Antoine Desprez, Associate Consultant
Taking Prime position? A look at Amazon’s potential impact on pharma
As the pharma market is rocked by the news of Amazon’s acquisition of PillPack — the online pharmacy — we briefly take a look at the history of the e-commerce giant and what impact its move into pharma may have on the traditional space.
As we have recently witnessed the retail giant, Amazon’s, first real big push into the online pharmacy market, the question on most peoples’ lips is: Could this be the end of traditional pharma space as we know it?
Delving into Amazon’s history, founded in 1994 it started as an online book retailer, selling to 50 states in the US and to more than 45 countries. Quickly diversifying the retailer now sells a vast array of products from video games to food and jewellery to nappies for babies.1
Combine this with the unrelenting amounts of products the company makes itself, including hardware and software, and its business strategy, it’s easy to see why it has increased its market share consistently. It actually managed to surpass retail stalwart Walmart in 20152 as the most valuable retailer in the US by market capitalisation and currently controls five percent of total US retail sales.
It is perhaps its data analysis that makes it the most terrifying for the ‘bricks and mortar’ world of retail, whatever the market.3 However, this trait also makes it appealing to the consumer, as it offers a cheap, easy and reliable retail experience.
So, what about its move into online pharma? Rumours and hearsay about various forays into this field have been rife for a little while, ranging from Amazon hiring a general manager to head up a pharma sales department last year4 to its proposal to deliver drugs via unmanned drones in 2015 — Amazon Prime Air.5
Yet this latest news, the acquisition of PillPack,6 has yielded a serious response on the stock market and caused quite a stir within the field of healthcare. Through this acquisition, not only does Amazon now have an online pharmacy in its pocket it also has one with pharmacy licences in 50 states in the US, which means it has what it needs to launch a full-scale pharmacy business.
Also, Amazon is expected to benefit from the PillPack acquisition with penetration of the over 55 market sector, something that has proved elusive for the company until now.
With the managing director of data and analytics company, GlobalData, Neil Saunders, stating this move to be ‘a warning shot in what is about to become a major battle within the pharmacy space’ it will be interesting to see what the next steps will be and what further impact will be seen in pharma.
At any rate, the pharma market is much more complex than simple delivery of pills so despite the immediate ramifications seen in share prices as a result of Amazon’s acquisition, a lot of experts anticipate this ‘up-ending’ of the pharma space to bottom out eventually with the market finding an equilibrium of sorts.7
Source: European Pharmaceutical Manufacturer
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