Amazon has announced that it is rolling out “Amazon Pharmacy,” which will be able to fill prescription medications through its online platform, making them an even bigger player in the pharmaceutical space. As financial analyst Cantor Fitzgerald noted, this is “the end of a long-anticipated period (ever since AMZN (Amazon) announced its purchase of PillPack in June 2018)”.

Two New Services Announced

This morning, Amazon announced two new pharmacy options under the Amazon name:

To utilize this offering, members will create an Amazon Pharmacy Profile and enter in their current prescription coverage information, if applicable. Prescriptions filled by Amazon will be coming from each member’s respective prescribing physician. The online service will then apply the respective plan design and calculate if medication is cheaper to fill using their pharmacy benefit insurance or going direct through Amazon. The direct option will act more like a discount card program, very similar to a GoodRx. If members do not have insurance, the direct option would be their only choice. Once a member decides if they are filling the prescription through insurance or directly through Amazon, Amazon will then mail the prescription to the member using its already vast fleet of delivery vehicles. Per NPR, generic and name-brand drugs will be available for delivery within days.

As of right now, Amazon has stated that Prime members can get discounts of up to 80% on generic drugs and 40% on brand-name medications when paying without insurance.

Amazon in the Rx Marketplace

Even prior to the pandemic, Amazon was by far the biggest ecommerce vendor and that presence has grown exponentially as people look to shift their shopping more to online vs brick and mortar. With Amazon now in the Rx space, there are a few important items that should be kept in mind. The key factor is going to be how PBMs classify Amazon Pharmacy. Will it be considered a mail order vendor or a retail pharmacy? This will be key to deciphering the potential utilization shift in the marketplace.

The classification is important because nearly all PBM contracts are predicated on the pricing caveat that the PBM owned mail order vendor shall be the exclusive mail order provider. If a client attempts to use another mail order provider, they risk having the PBM act on their right to nullify the contractual guarantees. If the classification does come through as a PBM mail order, this will likely have an overall negative impact according to financial analyst Cantor Fitzgerald. The more likely scenario is that it will be considered a retail pharmacy. Amazon’s entry to the pharmaceutical space has already caused disruption to drug stores – shares of CVS were down about 8% Tuesday at midday, while Walgreens and Rite Aid dropped 9% and 15%, respectively.

We see retail pharmacy chains offering home delivery now and those medications are still considered retail claims (unless CVS Caremark is the PBM and a claim is filled specifically through the mail benefit). If a member fills the claim through Amazon via their insurance, it will adjudicate as any other retail claim. On the other hand, if a member fills a script directly through Amazon that claim will run outside of the plan and it will not be captured by the PBM for reporting purposes–again, very similar to GoodRx.

Amazon has a reputation as a marketplace disruptor, and their foray into the prescription drug space is no different. Hays Companies will continually monitor how much utilization is transitioned to Amazon Pharmacy and will evaluate what the savings, if any, is to those members and clients.


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