Amazon’s PillPack deal a warning shot for PBMs

Amazon’s PillPack deal is continuing to make waves across the health insurance industry. From former pharmacists questioning the quality of patient care Amazon will deliver to determining what level of importance Atul Gawande will set the prescription drug acquisition as the head of Amazon, Berkshire Hathaway and JPMorgan & Chase healthcare venture, this has been important news for the American healthcare arena.

Shandon Fowler, owner and principal of Four8 Insights, a benefits, HR tech and healthcare reform consulting firm in Charleston, S.C., remains vocal about these recent developments in the market. The following is an edited and condensed discussion with Fowler and his thoughts on Amazon’s future in the healthcare and prescription drug market.

Why is Amazon entering the prescription delivery space?

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Shandon Fowler: Amazon is a very smart company, but they’re one that makes a fairly healthy number of acquisitions. This one seems smart but it will be about how well they’re able to execute.

It’s a very practical purchase in keeping with Amazon’s laser focus on customer needs. Having “personalized” prescriptions may lead to both healthier and more cost-effective outcomes for individuals, which is Amazon’s stock in trade. It also appears to follow a pattern of recent moves showing a strong commitment to all demographic categories, including the ABC project and also Amazon’s recent move to offer free Prime membership to Medicaid recipients.

Credit where credit is due, Walmart has been making innovative moves in healthcare for years and it’s been reported that it wasn’t Amazon’s big idea so much as it was their big offer stealing a golden opportunity from the still-king of retail. That in itself indicates that the fight among retailers over who “owns” the consumer is just getting started.

How does this impact the American healthcare delivery system overall?

Fowler: This purchase, and the fact that there was interest from both Walmart and Amazon at a minimum, shows that the healthcare industry is reshaping itself to be more data-conscious and consumer-centric. And when I say “consumer-centric” I mean individuals, whether they’re employees, self-employed, unemployed, doesn’t matter. Amazon wants as few people between them and their customers as possible, and they want to deliver meaningful results. The PillPack acquisition is proof-positive of their seriousness on both fronts.

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The PillPack Inc. application icon is displayed on an Apple Inc. iPhone in an arranged photograph taken in Washington, D.C., U.S., on Thursday, June 28, 2018. Amazon.com Inc. agreed to buy the online pharmacy startup PillPack, jumping into the health-care business with a deal that will give the retail giant an immediate nationwide drug network. Photographer: Andrew Harrer/Bloomberg

It seems like a very proactive response to the industry-wide hot-button issue of pharma prices and effectiveness. Amazon has always worked by squeezing supply chains to the thinnest of margins and then doing a volume business. Walmart pioneered it in retail. Between the two of them, the Aetna/CVS merger looks like it’s going to have to get a lot smarter and better about doing the same.

See also: What to know about Atul Gawande on his first day

How does this move impact pharmacy benefit management firms?

Fowler: They have bigger problems right now than PillPack. But it should serve further notice to them that “creative” business processes focused on distributing profit rather than distributing positive outcomes and savings to consumers are out of vogue and will hopefully never be back in.

What do you think the impact will be to employee benefit brokers?

Fowler: It’s a bit early to know for sure how brokers may be impacted but it certainly lends credence to the new movement of activist brokers looking to pinch or outright eliminate PBMs from self-insured models. I doubt Amazon will be positioning PillPack as a broker-offered product, In other words, don’t expect them to offer any sort of reseller deals. But consumer-centric brokers will have another potential tool to offer employees and individuals to better and more efficiently manage their prescription needs. Ultimately, that’s great for everyone.

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