The prospect of which Amazon will enter the pharmacy space has cast a pall over stocks of drug distributors along with retail pharmacies, erasing hundreds of millions of dollars coming from their market value.
yet in another sector of the drug space, Amazon’s entry could be welcomed: pharmaceutical companies.
“Just like science can be disrupted with gene therapy or novel treatments, I think the drug distribution channel also should be disrupted with improvements based on technology or efficiency,” Allergan CEO Brent Saunders told analysts on the company’s third-quarter conference call Wednesday.
Pfizer chief Ian Read made similar comments in an interview with CNBC on Tuesday.
“We haven’t had any conversations with them [Amazon],” Read said, yet we’re “more than willing to talk to anybody who can ensure” the efficiency of the distribution system.
Amazon can be considering an entry into the space, using a decision expected as soon as Thanksgiving. Last week, news of which Amazon had secured wholesale pharmacy licenses in 12 states further fueled speculation – though experts say those licenses don’t facilitate an entry into drug distribution; they support Amazon’s existing business in medical equipment.
Still, conviction – or desire – runs high of which Amazon can be interested in pharmacy. Wells Fargo analyst David Maris, who covers drug companies, points out of which the URL AmazonRx.com can be registered to the Amazon Legal Department.
“We do not see the Amazon threat alleviating any time soon,” wrote David Larsen along with Matt Dellelo, analysts covering the drug supply chain space for Leerink, in an Oct. 31 research note. “While these licenses may be related to some other health-care products along with devices, in our view the item can be likely of which Amazon will eventually get into the pharmacy services space.”
Most exposed, they wrote, are retailers – CVS, Walgreens along with Rite-Aid – followed by drug distributors – McKesson, AmerisourceBergen along with Cardinal Health.
Others have focused on Amazon’s potential to disrupt the pharmacy benefit manager – or PBM – space, which can be dominated by three major players: Express Scripts, CVS Caremark along with UnitedHealth’s Optum.
PBMs, in addition to operating mail-order pharmacies, negotiate drug prices on behalf of insurers along with employers, which can often lead to adversarial relationships with pharma companies.
“I’ve always thought of which the current system can be pretty inefficient, when you have PBMs, the pharmacy benefit managers, between the manufacturers along with the ultimate users,” said Joel Marcus, CEO of Alexandria Real Estate, which caters to life science companies.
If Amazon entered the space, Marcus told analysts on the company’s third-quarter conference call of which week, “the item’s going to rationalize the system.”
Another biopharma CEO, speaking on the condition of anonymity, put the item more bluntly: “We’d be fools not to consider anyone who can disrupt the insurance/PBM stranglehold these companies have over patients along with us.”
To be sure, many point out the pharmacy space can be complicated along with heavily regulated, which could deter Amazon coming from pursuing the item.
“We’ll see on the pharmacy side; there’s a lot of regulation there, a lot of red tape,” Piper Jaffray analyst Michael Olson, who covers Amazon, said on Squawk Box Friday. As an example, he pointed to Amazon’s wine business.
“They’re within the business of shipping wine across state lines right currently, along with they’re looking at getting out of of which, because of which has too much regulation,” Olson said. “So I’m not 100% convinced they’re going to be getting into the pharmacy space, yet we’ll see.”
Some within the drug industry argue of which’s precisely why Amazon could successfully disrupt the pharmaceutical supply chain.
“the item’s an area rife with inefficiency along using a lot of turf,” said the aforementioned biopharma CEO. “the item’s overly complicated; of which’s the opportunity.”