As early as the last quarter of 2017, there was already speculation that Amazon would enter into prescription drug sales. This speculation was brought about by certain actions by Amazon and how it was moving into the pharmacy business. Walmart, Amazon’s rival and now America’s largest retailer, has also been pushing into consumer health care for the longest time.
Amazon Basic Care
First up, the online retail giant has expanded its brand. It now has its latest Basic Care line of products that is essentially known as the over the counter medical e-commerce solution. The line offers about 60 of the most widely used and purchased health care products – cold, cough and sleep medications. Other categories include medications for children, digestive issues, feminine hygiene, hair growth, pain and smoking cessation.
What’s more, the brand offers a minimalistic white-label line that primarily offers lower prices than the name-brands can. The big advantage of Amazon’s Basic Care line is the absence of branding and marketing, which allows the retailer to reduce the consumer’s expenses.
Amazon says, “Everyone should have their basic health care needs met, without having to pay for extras like expensive marketing. Basic Care: it’s transparent. It’s authentic. And, it’s basic. In a good way.”
Basic Care is fast becoming the go-to for busy parents. Not only can they avail of bulk orders but they can also experience the fast, efficient, and affordable shopping that Amazon offers, every time.
Amazon’s Other Moves into Health Care
Amazon forged a partnership with Cardinal Health in 2014. Now, the company is selling medical supplies and equipment to hospitals and clinics and has even applied for the necessary state-by-state licenses. The company has partnered with J.P. Morgan and Berkshire Hathaway as well to help address the problem of rising employee health benefit costs.
AWS, Amazon’s cloud business, is currently offering its services to health-care customers in direct competition with Azure and Google Cloud. It offered job openings that tasked employees to network with health investors and start-up accelerator programs.
Amazon is also looking to bring voice technology into homes, hospitals and clinics. In partnership with Merck, it “challenged” Alexa developers to create “skills” that will help diabetics manage their condition. Hospitals are also trying out Alexa for tasks like helping surgeons make safety checklists or sharing vitally important instructions with patients once they get discharged.
What It Has Caused
Because of Amazon’s forays into the business of health, many healthcare companies and drug store industries have also begun pursuing deals as a response.
Walmart has been seeking to counter Amazon’s influence as well as to weaken the effect of the number of health-care mega deals in the process of crystalizing. Sources say that Walmart is having early-stage talks with Medicare insurance giant Humana about strengthening their partnership ties, although an acquisition has also been included in the discussion. The details of the potential deal were not immediately clear, however, and it is possible that it will not materialize. Walmart and Humana, when asked to comment, neither denied nor confirmed that such negotiations were ongoing. In any case, the deal to buy Humana will likely come at a high cost. Humana’s latest market valuation came at $37 billion and Aetna’s failed acquisition price for Humana was valued at $54 billion.
Steven Halper, a Cantor Fitzgerald health insurance analyst wrote in a recent report that “Humana is potentially an attractive asset for Walmart as it would help diversify its revenue stream,” and further noted that the two companies are already partners in a co-branded Medicare prescription drug plan. However, Halper added that Humana has recently been minimizing its relational contact with Walmart.
Walmart should be focused on forging better ties now, especially since there is a possible $69 billion megamerger between retail pharmacy giant CVS and health insurer Aetna and a proposed $54 billion merger between health Cigna and pharmacy benefits manager Express Scripts.
CVS is pushing for this acquisition deal as it would greatly expand its business in a new field of health care. A successful deal would spell very good ventures for both companies as CVS’s retail pharmacies, walk-in Minute Clinics and home services for infusion drugs would then cater to millions of Aetna’s members. On the other hand, it would also allow Aetna more access into the lives of the 44.7 million people it serves and manage their health care more efficiently. The CVS-Aetna proposal seeks to provide coordinated, personalized medical care for members with chronic condition at reduced costs.
Still, the Walmart-Humana merger can make a bigger impact on the delivery of a more effective and affordable health care as Humana already has its own pharmacy benefits unit and has opened nearly 200 standalone clinics that help Medicare members manage their chronic conditions. Walmart, alternatively, has pharmacies in most of its 4,700 stores and Sam Club brands, and in-store clinics in Georgia, South Carolina, and Texas. The combination would, thus, make Walmart a major provider of primary care.
Like Amazon, Walmart attempted to make measures to alleviate the impact that high health care costs has on its 1.5 million workers by offering its in-store clinics as lower cost points of primary care. The promotion did not push through because the company realized that paying for the value of a health care company upfront for its own employees’ benefit would defeat the purpose.
The Search for a New Health Care Model
Amazon’s move to enter into the business of selling prescription drugs has rocked the boat of the health care industry. It has also brought about responses from companies of the pharmaceutical industry to counter that move. It caused a flurry of company mergers and/or acquisitions left and right, especially for some drug store chain companies who highly depend on foot traffic.
Adam Fein, president of the Pembroke Consulting, said that Amazon’s entry into the market would “challenge the economics of the retail pharmacy industry.”
“Having a new competitor in the market would be great. Having a competitor that would potentially be transparent would be potentially even more interesting,” said Kevin Schulman, a professor of medicine at Duke University who has studied the web of financial relationships between drug companies and patients.
In the race to being the top health care model, health care firms are still searching for the model that can provide quality, efficiency, and affordable health care delivery.
“The fact that people gravitate to how much better something could be in some of these partnerships — I think that’s good. I think that in the long term that’s good for health care delivery,” said Tracy Watts, senior partner at health benefits consulting firm Mercer.
These reactions from health care providers bode well for Amazon, but whether this or the impact from the industry itself will be stronger remains to be seen.