According to a recent CNBC report, Amazon is gearing up for a possible push into the pharmaceutical market – the latest industry the online giant is looking to disrupt.
The draw of the estimated $3 trillion pharmaceutical industry has always held promise for Amazon, but in a year that has seen insurance plan deductibles rise considerably and driven more consumers to pay out of pocket for prescriptions, the timing could be optimal.
While this move to pharma is still hypothetical – Amazon has hired a general manager to formulate a strategy and has started recruiting a team with pharma background – the impact of such a move could change the pharma landscape up and down the supply chain.
The impact is clear from a pharmacy perspective. Selling prescription drugs online through the world’s largest marketplace would have a dramatic impact on existing pharmacies like CVS and Express Scripts.
Amazon has built its reputation by disrupting existing markets like books, apparel, electronics and more through cost and scale. By making these goods more available at a lower price, Amazon gives the consumer more transparency into actual costs, while providing them with greater convenience.
More than 4 billion prescriptions are ordered every year in the U.S., resulting in payments of more than $300B.
Consumer demand for this level of disruption in healthcare and pharma may ultimately be the deciding factor that drives Amazon into the market.
The consumer impact is notable – but what about the rest of the pharmaceutical industry? Will a potential Amazon pharmacy have an impact up and down the supply chain? Will this disruption reach the large pharmaceutical companies themselves?
CCC works with some of the biggest pharmaceutical companies in the world, primarily to facilitate access to and sharing of knowledge and information to drive newer and greater discoveries. The drug discovery process is capital- and research-intensive — with companies sometimes spending years and billions of dollars to fuel a single discovery.
Companies often recoup these costs on the back end in the sales process. Could Amazon’s disruption of the pharmacy market impact research & development and the creation of new drugs? Or will Amazon push the entire pharmaceutical supply chain to double down on innovation and R&D, finding newer and better ways to drive discovery?
Unfortunately, it’s hard to say until Amazon makes a move – but what we can say from our experience in the industry is that the leading pharma companies are not sitting back waiting for a market disruptor like Amazon to dictate how to improve their businesses. The leaders are already in the process of streamlining R&D and improving capabilities across the board.
A good example of this is the investment big pharma is making in biotech startups and mid-sized companies that are driving innovation and playing an increasing role in bringing new drugs to market. Leading pharmaceutical companies are establishing relationships with small to mid-sized biotech companies to help with their drug pipelines, particularly with the early scientific research and development piece.
So, what will Amazon’s pharma legacy be? Will the company drive more innovation like this across the industry? Or will Amazon’s entry into the pharma market ultimately mark the day pharma changed for good? What are your thoughts?