Amazon took a giant step further into the healthcare market on Thursday with its announcement to buy online pharmacy PillPack. The move comes after its joint healthcare partnership with Berkshire Hathaway and JPMorgan Chase & Co. , and the appointment of Atul Gawande as the head of the venture. Health insurance experts told Employee Benefit Adviser how this deal will impact the healthcare space.
Shandon Fowler, owner and principal of Four8 Insights
I thought of two opposing perspectives when I heard of the purchase. On one hand, there were plenty of people who thought Facebook was crazy to pay $1 billion for Instagram when they did, but now that seems like a steal of the century.
On the other hand, everyone was really interested when Michael Jordan retired from the NBA and started playing baseball, but it ended up being more of a spectacle than anything else.
The point is that 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 are able to execute.
I’m shocked, as I was in February, about how strongly the market is impacted by an Amazon move. The loss of value for other pharmaceutical companies is way out of proportion with the move itself.
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 and 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.
I must give credit where credit is due, Walmart has been making innovative moves in the 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.
Jennifer Johnson, vice president of sales and marketing at Southern Scripts
Southern Scripts views this as a very positive move. PillPack is currently a preferred pharmacy in the Southern Scripts network, and Whole Foods is a client of ours, which is now owned by Amazon.
Our leadership speaks with TJ Parker, CEO of PillPack, and his team regularly and this is exactly what they needed to get over the hump with PBMs, forcing PillPack into the mail order network.
We view the services of PillPack as cutting edge, offering both employers and employees a much needed higher level of care.
Nathan Pierce, manager of market analysis at OneDigital
Not only will Amazon find ways to squeeze efficiency out of the pharmacy transaction process, they may adopt a strategy of making prescription drugs a loss-leader to make inroads into a deeply entrenched prescription drug market.
This could make pharmacy transactions more convenient, more transparent and all-around a more pleasant experience.
Rob Piazza, product manager of analytics at Benefitfocus
Payers and pharmacy benefit management companies could have worked together years ago to better control rising drug cost, but they didn’t do enough. Just like Apple, swooping in to change the music industry with an innovative technical solution, Amazon will now force change on these payers and PBMs, which I believe will benefit us all as healthcare consumers.
What do we think this will do to the competition and industry? Remember everything in healthcare is about leverage. Payers originally pulled together groups of companies and members to negotiate rates with healthcare providers.
Then providers got smart and created health systems within communities so that payers couldn’t threaten to throw these large systems out of the network during negotiations, thus providers had the leverage.
Now that Amazon poses a real threat to traditional pharmacy benefit management, I’m betting the PBMs will run faster towards purchasing the payers, like the proposed CVS acquisition of Aetna.
This would be an attempt to steer those members back to their retail chains through the actual benefit plan design. But I’m not worried. With the Amazon name, employers and consumers will realize they can save money by shopping directly from the mail order drug company thus cutting out some of the middlemen and expense.
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