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There were multiple reports over the weekend about how analysts expect Amazon to move into the prescription drug business, with CNBC saying Amazon expects to make a decision as soon as Thanksgiving.

If Amazon makes such a move, CNBC reports, “it will start expanding its senior team with drug supply chain experts. Amazon typically spends years researching opportunities before it telegraphs its intentions. The opportunity to sell drugs online is alluring given its market size -- analysts have estimated the U.S. prescription drug market at $560 billion per year. Amazon is well aware of the complexities, say sources familiar with the company's thinking.”

Bloomberg writes that “Amazon could quickly grow in prescription drug sales and distribution, especially if it bought a mid-sized drug benefit manager and used it to create a more transparent pricing model, said Linda Cahn, a consultant at Pharmacy Benefit Consultants in Morristown, New Jersey.

“Pharmacy benefit managers, or PBMs, administer drug benefits for employers and health plans, processing the prescriptions pharmacies dispense. Currently, final prices for many drugs are negotiated in secret deals between drugmakers and PBMs.” Amazon conceivably could make pricing transparency a core differential advantage if it were to get into the PBM business.

The Bloomberg story notes that “Amazon has a long standing interest in prescription drugs, an industry with multiple middlemen, long supply chains and opaque pricing. In the 1990s, it invested in startup and Amazon Chief Executive Officer Jeff Bezos sat on the board. Walgreens eventually purchased the site and shuttered it last year to focus on its own branded website … Last November, Amazon began a partnership with Seattle-based pharmacy Bartell Drugs to deliver over-the-counter drugs from its stores to shoppers through Amazon’s delivery service Prime Now. The partnership helped Bartell create an online presence to rival Walgreens. It also gave Amazon access to convenience items close to customers through Bartell’s store locations.”

Amazon has not commented on the reports.
KC's View:
My sources tell me the same thing … that it is a matter of “when,” not “if.”

If Amazon does this, it won’t just affect the likes of CVS and Walgreen … it also will erode the pharmacy businesses built up by every food retailer. It won’t all happen at once, but in small nibbles that will add up to enormous bites.