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Amazon Is Eyeing the International Pharmaceuticals Market. Here’s Why

 5 min read / 

Like it or hate it, online retailer Amazon has had an effect on how and where people shop. And it may be extending its reach into prescription drugs, and not just online.

Amazon is not the only online retailer, and there are plenty of online suppliers of pharmaceuticals, over-the-counter, prescription and illicit (especially on the darknet). Some people choose to shop online simply for convenience; others for cost savings.

Amazon and Book Sales: A Cautionary Tale

Amazon did the same for books, and many independent stores and chains fell by the wayside. Critics fear that Amazon could similarly upend drug sales and distribution, crippling mom-and-pop pharmacies and big chains alike.

Not that Amazon has put an end to brick and mortar bookstores entirely. Some independents and the  chain are still doing well. Waterstones recorded a pre-tax profit of $12.6m on sales of $527.6m in April 2016, as opposed to the $5.8m loss in the previous year. Still, Amazon has dominated the online book market to the extent that it has no real competition there. In 2016, of the $3.9bn spent on e-commerce for books in the US, 93 % went through Amazon. So did 43 % of all online retail sales in the US.

Amazon in the International Marketplace

At first glance, it seems Amazon is not doing as well internationally, posting a loss of $936m in the third quarter of 2017. However, its international net sales increased to $13.7bn, 29.3% up for the year. The reason for both figures may be that Amazon is investing in future growth instead of just going for short-term gains.

On both sides of the Atlantic, Amazon has moved into other areas, too, from electronics to clothing, furniture to (maybe) banking. Now Amazon is interested in brick-and-mortar grocery stores, and that may dovetail with its reported interest in the $412bn US pharmacy business. (It tried to become a player before, buying 40% of the online Drugstore.com in 1999 before brick-and-mortar chain Walgreens’ bought it outright.)

Amazon, Grocery Stores and Health Insurance

In the US, Amazon recently purchased the Whole Foods Market chain of organic produce stores. And in the UK, Amazon has registered for a trademark for its Amazon Go checkout-free grocery store format. (The British Retail Consortium had already predicted the loss of nearly a million of the UK’s three million shop jobs by 2025 due to automation.)

In the United States, rumours that Amazon might use its recently acquired Whole Foods Market grocery chain to sell prescription drugs offline, too, sent stocks for existing pharmacy chains into at least a temporary tailspin.

And UK health insurers are nervous at the news that Amazon is recruiting insurance professionals in London for a venture in not just the UK, but France, Germany, Italy, and Spain as well.

Can Amazon Offer Pharmaceuticals?

That Amazon was able to dominate the book market was in part because the big bookstore chains—in the US the defunct Borders and the still-struggling Barnes and Noble—failed to jump into the online and electronic book market until after Amazon was well-established.

With pharmaceuticals and health insurance, doing business online is, much better established. Besides, pharmaceuticals aren’t books, and the rules and challenges are different:

  • Medicines only can be sold by a pharmacy with a state-issued licence. Amazon has been applying for pharmacy licences in some states.
  • Medicines must be prescribed by a doctor, then checked by a pharmacist. Amazon is not set up for that, and Amazon customers cannot expect the ease of one-click shopping with which they are familiar. They could set up a partnership with an established pharmacy chain such as Walgreen’s, as CVS Health is now doing with health insurer Aetna.
  • In the US most people get their pharmaceuticals through employer-provided health insurance, though sometimes they pay a small portion of the cost. At least one analyst thinks Amazon might be able to offer a drug discount programme that would encourage people to choose its pharmacy benefit over the one their employer offers.

Healthcare Uncertainty Leaves An Opening

Amazon’s prescription pill overtures may be most attractive in the US, where drugs can cost three times as much as in the UK, and healthcare is not government-provided. The existing health care plan, the Affordable Care Act or ObamaCare, is being deliberately sabotaged and soon may not cover any form of pre-existing condition, mental health, or—despite opioid addiction just being declared a public health emergency—substance abuse treatment, either at Alcoholics Anonymous-inspired 12-step or non-12-step rehab centres. Meanwhile, the US Congress has failed to pass its healthcare reforms into law at least three times.

With such neglect in place, and Amazon’s favourable image and convenience, the online superstore has an opportunity to do well, if not dominate, the prescription pharmaceutical market on both sides of the Atlantic. Whether that would be a good or bad thing remains unclear.

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