At first, Amazon sold books and it was all pretty simple. They expanded their online retail shopping when they added music, appliances & electronics into the mix. Some consumers used the platform to do all their shopping online, but this disrupted traditional retail stores and they were forced to close their doors, commonly known as the ‘Amazon Effect.’
Now Amazon is putting plans into effect to disrupt another industry – the pharmaceutical market.
If Amazon heads into the pharmaceutical business this could be detrimental to the entire industry. It will affect myriads of pharmaceutical companies such as the St. Louis-based Express Scripts – a massive 340,000ft² pharmacy distributor that accommodates over 900 employees.
It would seem the e-commerce giant isn’t backing down anytime soon as Amazon took their first step into the business in June 2018 by paying $752 million for the purchase of Pillpack located in Boston.
Pillpack is an online pharmacy that exports medication in organized doses to patients all over the US.
How Will Amazon Affect the Pharmaceutical Industry?
The build-up of Amazon’s large pharmaceutical distribution plan could take years to accomplish but their strategy is still in place and they’re ramping up. This could disturb large American chains as well as independent pharmacies.
Over the years, Amazon eyed the pharmaceutical business closely. In 2017, they started down the path by applying for distribution licenses in at least 12 different US states.
In 2018, Amazon made headline news as the company bought into Pillpack. The Pillpack Company has only been in the industry for six years but they have a network of five distribution centers in New Hampshire, Florida, New York, Arizona and Texas. These places have licenses to ship to all 50 states.
On the day of Amazon’s announcement about the Pillpack partnership, the shares of Walgreens Boots Alliance, Rite Aid Corp and CVS fell hard. The three top pharmaceutical companies lost over $11 billion in market value in a single day.
Some experts say that the deal with Pillpack won’t change the pharmaceutical industry significantly as Pillpack has less than 1,000 employees and $299 million revenue, which is small compared to CVS with $131 billion revenue and 200,000 employees. However, because of the acquisition between Amazon, Pillpack is said to increase their revenue and their foothold.
The frightening aspect for Pharmaceutical companies is that Pillpack has myriads of licenses and with the help of Amazon, they’ll be getting more. It’s already having a negative impact on the pharmaceutical industry.
Here are a few ways Amazon moving into pharma may influence the industry.
- There will be more uneducated patients who won’t know what medicines are better for them and which ones to stay away from.
- People won’t have a personal relationship with their pharmacist who can assist them with the correct information about what medication will aid them best.
- Not being educated about what products are out there could be dangerous to the consumer.
Loss of Customers
Traditional pharmacists will feel the impact the most as they could potentially suffer a loss in revenue. As the Amazon venture is fully digitalized and user friendly, consumers will buy from the online stores and not from independent pharmacists.
There will be a loss of revenue which could force independent pharmacists to shut down. Which bring us to the next point: loss of jobs.
Loss of Jobs in the Industry
It may take a while for the “Amazon Effect” to kick in, but when it does it will have devastating results on traditional pharmaceutical companies.
Because of the potential loss of customers and revenue, these companies may be forced to close their doors. This will cause thousands of people in the industry to lose their jobs.
What does the Future Hold for Pharma?
Many Pharmacies are now searching for ways to “Amazon-proof” their businesses. Pharma leaders are in the process of improving their capabilities across the board as much as they can.
Here are a few ways you can “Amazon-proof” yourself:
- Maintain positive relationships with your customers
- Inform customers that purchasing medicines online is not always the safest option
- Ensure you know your community and customer base well
- Provide conveniences to your customers that Amazon can’t, particularly one on one in person service.
Although Amazon’s move in the pharmaceutical industry is inevitable, there are ways you can keep your business from going under. After all you simply can’t put a price tag on the service and care pharmacists provide their customers.
Will Amazon’s entry into pharma change the industry forever? It’s difficult to say how this will influence the pharmaceutical industry when Amazon goes ahead with a complete online distribution process. Pharmacies will be required to take measures so they can stay relevant in their communities and healthcare facilities.