The Impact of Amazon on the Pharmacy Industry


October 24th, 2019

The impact of Amazon on the pharmacy industry is real since its acquisition of PillPack. What does this mean for both chain and independent pharmacies?

amazon impact on the pharmacy industry

No industry wants Amazon to become a competitor. Amazon has completely revolutionized the retail experience, causing many brick and mortar stores to go out of business. Numerous high-profile brands have even gone out of business while others have had to redefine their business models. The impact of Amazon on the pharmacy industry is being felt since it acquired PillPack in 2018.

Amazon Doesn’t Enter into a Market without a Plan for Domination

Amazon doesn’t enter markets on a whim. They see opportunities. In this case, an opportunity to take a share of the $560 billion prescription drug industry. Amazon had previously been interested in the market but ran into hurdles with securing pharmacy licenses in each state. With their acquisition of PillPack, they no longer have this challenge, as the online pharmacy had already secured these.

Amazon chose PillPack because of its pharmacy acumen and its investment in technology. PillPack hasn’t yet become a top player in the pharmacy market, with about $100 million in revenue in 2017.

PillPack had also, after some struggles, been able to develop working relationships with major benefit managers and insurers. This was no easy feat considering, many of those companies have mail-order businesses that directly compete with PillPack.

All of these things made it an attractive purchase for Amazon and an easier way to get their foot in the door versus building something on their own.

But are patients willing to shift their prescription purchase online?

Prescription Drugs Remain a Brick and Mortar Type of Business, But Will Disruption Cause a Shift?

While most Americans have embraced online shopping for a variety of items, hence the rise of Amazon, pharmacy remains a brick and mortar type of business. According to research firm Iqvia, almost 90% of prescriptions are filled at the pharmacy counter.

But can Amazon change patient’s minds? One thing to consider is that younger generations, who are digital natives, are quickly aging and may have the need to take regular medications. They are attracted to convenience, and Amazon certainly offers this.

Also, most major pharmacy chains have the same capabilities as PillPack. They aren’t currently seeing any major transitions from patients seeking to have medication delivered. While the major chains may not feel a threat from Amazon yet, they certainly have it on their radar.

But do they have the marketing touch that Amazon has?

Independent pharmacies may be feeling the impact of Amazon on the pharmacy industry even more significantly. While patients turn to filling short-term medications like antibiotics at their pharmacy, the reality is that 85% of prescriptions filled in the US are for refills, per Iqvia.

That’s a substantial percent of prescription fills, Thus, patients may find that it’s both easier and less expensive to turn to online pharmacies. While PillPack has not aggressively competed on price, with it now part of Amazon’s ecosystem, that could change.

The effect of this could create new pains for independent pharmacies. So, what’s the answer for independent pharmacies? It may come down to relationships, which these types of pharmacies put a significant focus on to ensure patient retention. A little old school patient engagement could keep their customers coming back and not looking for other options.

However, many chain and independent pharmacies also offer delivery of medications, enhancing the convenience factor. Although this comes with additional costs. This disruption in the industry may spur more innovation and ideas by pharmacies looking to hold their market share.

Traditional Pharmacies Can Leverage Data to Remain Competitive

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One thing is for certain is that any pharmacy can learn more about their operations and how they compare by having access to their data. Data delivers insights, which then compels action. With pharmacy data analytics, you can discover things like:

  • Top prescribers, allowing you to cultivate stronger relationships
  • Patient retention stats, providing you a 360-degree view of if you are losing or acquiring customers
  • Top scripts filled, helping you manage inventory better

With this business intelligence, you can optimize your operations and be better prepared for the impact of Amazon. Learn more about how we can help with you with pharmacy data analytics today.

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