Amazon rattled the pharmacy world when it announced its new Amazon Pharmacy concept in late November. Competitors’ stocks fell from 8 to 22 percent the day the news was shared. The timing could not have been better for Amazon Pharmacy, as CNBC reported: “Americans are increasingly relying on getting their medicines via mail to avoid possible exposure to the coronavirus. That shift could be permanent.”
So what exactly is Amazon Pharmacy? The venture allows Amazon customers to set up a secure pharmacy profile, add insurance, manage prescriptions and choose payment options. Amazon Prime members receive free two-day delivery. This all can be done easily through a desktop or mobile device. Ultimately, Amazon expanded what it already did best into prescription medication: ease of ordering and fast delivery.
Note the tie-in with Amazon Prime. Forbes found that nearly 60 percent of Amazon’s 70 million Prime customers said they would consider having Amazon deliver prescriptions. That was in September, months before Amazon Pharmacy was announced. It’s a potent market opportunity for growth. Only 29 percent of overall consumers get pharmacy by mail.
But with a little time comes perspective, and Amazon—which has roiled other industries when it has decided to enter their markets—is finding its place in a crowded field. Its competitors are stepping up to meet the challenge, too. And, while the timing may be fortunate given the shift in consumer habits shift, questions remain around Amazon Pharmacy and its potential impact on where consumers get prescriptions.
It also points a potential path for other retailers, especially as e-commerce continues to grow. The pandemic-fueled e-commerce boom is here to stay. The Adobe Digital Economy Index anticipates Americans will spend $1 trillion on ecommerce in 2022, Forbes reports. That’s up from $812.8 billion in 2020.
But physical retail can hold onto much of its ground, if it has answers to the misconceptions that Amazon Pharmacy has revealed.
Misconception 1: Customers Can Get Better Prices at Amazon Pharmacy
When it comes to competitive pricing at Amazon Pharmacy, the truth is it’s complicated.
Amazon’s pharmacy initiative aims specifically to lower medication costs for Amazon Prime members without insurance. Its prescription savings benefit offers up to 80 percent off generic and 40 percent off brand name medications.
One investigation found that there were real benefits were for Prime members without insurance. For Prime members with insurance, the benefit is the same free two-day shipping they get already.
Mark Campbell, PharmD, vice president of clinical solutions at RxBenefits, tells Healthline he agrees that those “who pay for their medication entirely out of their own pockets” will find Amazon Pharmacy most advantageous. According to the US Census Bureau, in 2019 the uninsured constituted 10.3% of the total population.
For everyone else, there are plenty of competitive prescription savings programs with their own added benefits. For example, Walgreens Prescription Savings Club offers discounts on prescriptions, immunizations, private label products, and more. CVS’ program includes having pharmacists explore available coupons, insurance coverage, and other lower-cost options. And of course, any pharmacy competes with programs like Good RX, which compares pharmacy prices to provide the best price on each prescription from a variety of retailers.
Ultimately, Amazon is working with the same insurance companies as the other players, which means it must work with the same network of pharmacy benefit managers. Unlike other industries Amazon has disrupted, pharmacy doesn’t really offer a “race to the bottom,” i.e. the ability to offer the lowest prices. Drug manufacturers keep a tight grip on drug prices in the largely unregulated industry.
Misconception 2: Amazon Pharmacy Competes on Convenience
While two-day shipping is a great benefit of Amazon Pharmacy for Prime members, it’s hardly a game-changer. Walgreens, Rite Aid, and CVS each offer one- or two-day delivery by mail for a range of prescriptions in certain markets. BOPIS (Buy Online Pick up In Store) and drive-through prescription pickup are also available at some stores. Meanwhile, CVS is piloting a drone prescription delivery program in Florida that services retirees at The Villages, the nation’s largest retirement community with a population of 135,000.
This all of course begs the question of whether any of these options can really be more convenient than good old-fashioned stores. Walgreens, Rite Aid, and CVS each have thousands of locations. When a child has a fever, who can wait for two days for home delivery?
Meanwhile, new entrants into the field are nibbling around the edge of what Amazon Pharmacy promises. TruePill, a start-up that landed on Forbes’ list of Next Billion-Dollar Startups in 2019, is a B2B service that serves drug manufacturers and pharmacy benefit managers, connecting them to local pharmacies to fulfill orders quickly. In New York, Medly uses contract delivery drivers to pick up from local pharmacies and deliver to consumers’ homes. Last year, it landed $100 million in investments to expand its services.
Clearly, Amazon is hardly the only player in this market and its entry hasn’t yet cleared the field.
Misconception 3: Amazon Pharmacy Will Bury Brick-and-Mortar Pharmacy
While Amazon’s announcement may have sent stock prices tumbling, it’s since become clear that “this announcement is much less disruptive than it appears,” Pembroke Consulting’s Drug Channel Institute CEO Dr. Adam Fein told Drug Channels. He added that Amazon has opted to “join the drug channel, not fundamentally change it.”
In recent years, retail pharmacies are doing their part to fend off new threats. Walgreens, CVS and Rite Aid all have honed their approaches to become well-rounded health and wellness hubs, not just places to pick up aspirin and antibiotics. While Amazon boasts many of the same products, the expertise and assistance from a clinician or trained retail sales associate isn’t available online.
Investors eventually backed off signing retail pharmacy’s death certificates. After declaring investors as “overreacting” to Amazon Pharmacy’s entry into the market, Barrons noted that “free shipping and discount cards add nothing that isn’t available from CVS and Walgreens.” Analysts speculated that the real value would be to increasing the value of Amazon Prime, which raised its prices in 2018 from $99 to $119.
Granted, Amazon has a strong relationship with its Prime customers, who spend on average $1,400 per year with the retailer. But retail pharmacies have invested in recent years in their own loyalty programs, all while increasing the value of its brick-and-mortar locations.
They’ve also been long honing their omnichannel prowess—most notably in the pandemic—in the form of delivery and click-and-collect. And to that point, BOPIS isn’t going anywhere. The Adobe Index reported that this type of delivery grew 67 percent in 2021 compared to 2020 and a consumer survey found that 30 percent of shoppers prefer this to home delivery.
CB4 Insight: Retail pharmacies can continue to fend off threats from digital delivery by creating easy and rewarding in-store experiences. CB4 is the easiest, fastest, and most rewarding way for stores to sell more product and satisfy shoppers. Watch a short video on how it works.
