Amazon Will Offer Members 6-Month, Discount Generic Rx Drug Fills

by Peter Johnson

 

Amazon.com, Inc. launched a long-anticipated expansion of its pharmacy business on June 8, saying it will allow Prime members to purchase up to six-month supplies of generic prescription drugs for $6. Experts say Amazon is well positioned to claim substantial market share in the growing prescription drug delivery market, which incumbent players have already begun to target.

"I love the model," says Ashraf Shehata, national sector leader for health care and life sciences at KMPG. Shehata expects that Amazon will offer "almost a branded generic, although it's branded by the distributor, not the manufacturer. I wouldn’t be surprised if we're going to see an Amazon Basics side of this — they already have a branded category for other commodities that would fit nicely into this."

Shehata says the idea of a white-label generic drug line isn't novel, but Amazon's unmatched online retail operation gives it meaningful differentiation.

What separates Amazon is "consumer convenience," he says. Customers are going to be swayed, he predicts, "not only by the branded generics and the pricing, but people like the familiar consumer front end."

Text on Amazon's landing page for the expanded service indicates that, while the company will seek to enter pharmacy networks with insurance carriers, the firm will try to bypass them when possible and capture rebate revenue for itself. While the site says that "we work with most insurance plans," it also says customers can "save by paying with Amazon Prime." According to a June 8 note by Citi analyst Ralph Giacobbe, Amazon's Prime prescription drug operation is administered by Inside Rx, a subsidiary of Cigna Corp.'s Evernorth PBM.

Brian Anderson, a principal at Milliman Inc., says that Amazon will be in the pole position as consumers begin to think of online retail as the default space for filling prescriptions, particularly for maintenance medications. He also expects that Amazon pharmacy could increase utilization.

Shehata says that Amazon's logistics give the company a notable advantage over legacy players. He also predicts that Amazon can "have a much more predictable inventory of these categories of drugs," since it will have a more centralized pharmacy operation than legacy pharmacies. What's more, Amazon "knows a lot about the individual [members.]"

 

From RADAR on Drug Benefits