Report: Amazon near a decision about pharmacy sales
Amazon is set to decide in the next few weeks whether to jump into prescription drug management and sales, CNBC reports, citing an internal Amazon memo and an unnamed source familiar with the matter.
The report follows analysis from specialist investment bank Leerink Partners in recent days that it’s only a matter of time before Amazon gets into the space, according to Benzinga. Amazon declined to comment to Retail Dive on the report, saying in an email, "We have a longstanding practice of not commenting on rumor and speculation."
In response to the reports, shares of drug store retailers Walgreens, CVS Health and Rite Aid all fell around 5% on Friday, Reuters reports.
Amazon already sells medical devices and employs executives to deal with health care-related regulatory issues, and was previously said to be exploring how to ramp up its efforts in the pharmacy space. All of this has led Leerink analysts to indicate a certain inevitability that Amazon will enter the space within the next two years.
Yet retailers like Walgreens haven't been all that worried. In July, Walgreens CEO Stefano Pessina expressed doubts that the drugstore and its rivals would have to contend with Amazon's entry into the prescription market.
Sales of prescription drugs provide drugstore chains with a steady stream of customers, but it's a volatile space. Big-dollar corporate and government contracts are won and lost, generic versions of often-prescribed medicines can ding sales and the Affordable Care Act has brought some price pressures to the health care sector in general, bringing costs down for consumers but not necessarily for retailers. Added to the instability is the current political environment, where recent actions by Congress and the Trump administration are poised to disrupt the space further and have already introduced uncertainty into the market with a series of votes and executive measures widely seen as undermining aspects of the health care law, including prescriptions.
Amazon's major foray into brick-and-mortar via its $13.7 billion takeover of grocer Whole Foods led to speculation that it could make a similar play in pharmacy even before that acquisition was complete. Now that it's a done deal, some analysts see Amazon's entry in pharmacy all the more likely.
It's not just Walgreens, Rite Aid or CVS that would be challenged by such a move; Amazon in the pharmacy space would also challenge Walmart, a major pharmacy player with the advantage of a huge physical store fleet that is increasingly willing to go head-to-head with Amazon in e-commerce. With new features added to its mobile app for pharmacy and money services customers, including new ways for shoppers to skip regular checkout lines, Walmart is looking to differentiate the shopping experience by offering the same level of convenience as Amazon while continuing to leverage its physical footprint, Stephan Schambach, founder and CEO of mobile platform NewStore, told Retail Dive in an email earlier this year.
But Walmart's new features won't necessarily stop Amazon from bringing its own strengths to the space, which is highly regulated, yet highly lucrative, he noted. "Though challenges may arise in entering a regulated market, breaking into a multi-billion market opportunity for the e-commerce company can lead to huge success," he said. "Speedy delivery options and lower drug prices is the next step for Amazon in addressing the massive demand for a simpler, faster, overall more convenient shopping experience."
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