/Exclusive: Amazon Pharmacy Is Considering Setting up Physical Stores – Business Insider

Exclusive: Amazon Pharmacy Is Considering Setting up Physical Stores – Business Insider


  • Amazon is considering the launch of physical pharmacies, Insider has learned.
  • Amazon Pharmacy’s leaders have discussed using Whole Foods locations and creating stand-alone sites.
  • There is not a concrete plan to do so, three people familiar with the matter said.
  • See more stories on Insider’s business page.

Amazon is considering options for creating a physical retail-pharmacy presence in the US, three people familiar with the matter told Insider. It’s part of a plan to win over a larger slice of the prescription-drug industry.

There is not a concrete plan to do so, and the talks are mostly exploratory, the people said. They were not authorized to speak to the press. Any meaningful rollout of stores could take more than a year, one of them said.

Amazon Pharmacy, which launched in November, lets people buy their prescription medications online with two-day shipping if they have a Prime membership.

The venture has discussed setting up stand-alone stores in a handful of locations, including Boston and Phoenix, said one person with direct knowledge of the matter. There have also been discussions about putting the pharmacies inside of Amazon-owned Whole Foods locations, the three people said. Local stores could help Amazon reach more kinds of patients with more urgent needs because of the amount of time it takes to ship medications.

Healthcare stocks dipped on Insider’s reporting on Wednesday morning.

In retail pharmacy alone, the trading erased more than $6 billion in market value within an hour of the report publishing. Rite Aid and Walgreens declined by more than 4%; CVS by more than 3%; wholesalers like Cardinal Health and health plans like Cigna also saw about 1% dips. 

But stocks stabilized some by day-end. Rite Aid closed at a 2.49% decline day-over-day, and CVS was down by just 1.56%. Walgreens’ stock, however, was still down by more than 4%. On Wednesday, healthcare analysts wrote in notes that Amazon’s move into pharmacy is still theoretical, and stressed that it would take years for Amazon to put a dent in the other companies’ retail businesses.

Amazon could test different pharmacy strategies

A spokesperson for Amazon said that the company doesn’t comment on rumor or speculation.

“Amazon Pharmacy is focused on making at-home delivery pharmacy easier and more convenient for customers,” the spokesperson said. “Customers can complete an entire pharmacy transaction on their desktop or mobile device through the Amazon App and have medications arrive at their door, with free two-day delivery for Prime members.”

It’s likely we’ll see Amazon test different strategies for its in-person pharmacies, two of the people said.

Amazon bought Whole Foods in 2017, and the stocks of pharmacy companies tanked the day the deal was announced on suspicion that Amazon could enter the space. But so far, Amazon hasn’t yet tapped the more than 350 Whole Foods locations, which don’t have pharmacies, to build out its new prescription business.

Building out pharmacies within Whole Foods would be a big undertaking because each store would require new equipment, and the company would need to hire pharmacists. With just 350 shops, Whole Foods doesn’t offer the same reach as pharmacy giants CVS and Walgreens, making the returns uncertain.

Building out this kind of infrastructure can take years, Evercore ISI healthcare analysts Elizabeth Anderson and Patrick McNally said in a note on Wednesday. It would require a ramp in hiring, with about three pharmacists and five technicians needed per location, to match services at other pharmacies. That type of model would require about 200 prescriptions per day to break even, they wrote.

“While a new, large, competitor is not something to entirely brush off, we note that AMZN has been in pharmacy since 2018 with their acquisition of PillPack and in the time since, the company has not gained much market share (even since the Amazon Pharmacy relaunch last fall),” Anderson and McNally said.

The retail pharmacy space is also highly competitive, and many markets are already saturated with stores from CVS, Walgreens, Walmart, and Rite Aid, Cantor Fitzgerald analysts Steven Halper and Kyle Mikson said in a note. It also remains to be seen if Amazon’s online offering, including the discounts, will be successful, they wrote.

The biggest pharmacies have storefronts

The biggest US pharmacies by prescriptions, such as CVS Health, Walgreens, and Walmart, have thousands of stores apiece.

Industry observers have long speculated that Amazon’s pharmacy business would build a retail pharmacy footprint, too, especially following the $1.6 trillion giant’s investments in grocery services and convenience stores.

Amazon Pharmacy got its start when Amazon acquired online pharmacy PillPack in 2018. PillPack was designed for people with multiple daily prescriptions, such as customers with chronic conditions whose medications are predictable and can be scheduled in advance.

Setting up physical stores in addition to the online business could allow Amazon to grab a bigger slice of the $370 billion US prescription-drug market because many people need medications more urgently than within 48 hours. Those diagnosed with an infection, for example, may be more likely to send their prescription to a nearby pharmacy so that they can pick it up immediately.

Amazon has stayed relatively quiet about its pharmacy pursuits for years following its PillPack acquisition, but it’s recently been rolling out more features. Earlier this month, it launched a tool that allows shoppers to compare drug prices across pharmacies.

But many of its benefits are dependent on other established healthcare players. The savings that Amazon Pharmacy offers Prime members, for example, is administered through pharmacy-benefit manager Express Scripts’ Inside Rx.

Under that benefit, members can save up to 80% on generic drugs and 40% on brand-name drugs when paying for medications without insurance via Amazon — or at more than 50,000 other pharmacies, many of which are owned by Amazon’s retail rivals.

This story was updated later in the day on Wednesday with more recent stock prices and comments from healthcare analysts.

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