Several pharmaceutical executives commented this week that the drug distribution market is “ripe for disruption” and could benefit from Amazon entering the fray.
According to a report in CNBC Allergen’s CEO, Brent Saunders, said on a third-quarter earnings call this week, “Just like science is disrupted with gene therapy or novel treatments, I think the drug distribution channel also should be disrupted with improvements on technology and efficiency.”
The head of Pfizer reportedly also commented that he’d like to see a more efficient distribution system.
If Amazon starts selling medications, it could shake up the distribution market — which is dominated by McKesson, AmerisourceBergen and Cardinal Health — as well as the industry for pharmacy benefit managers (PBMs), namely Express Scripts, CVS Caremark and Optum.
PBMs, who negotiate drug prices and serve as the middlemen between pharma companies and consumers, often have tense relationships with manufacturers.
“I’ve always thought that the current system is pretty inefficient when you have PBMs, the pharmacy benefit managers, between the manufacturers and the ultimate users,” Joel Marcus, CEO of Alexandra Real Estate, which serves life science companies, told CNBC.
After news recently surfaced that Amazon might enter the drug space, analysts from Morgan Stanley issued a note explaining why they believe the change would be good for the pharmaceutical supply chain.
“Establishing direct relationships with branded manufacturers, would be the most critical to changing the marketplace as we know it today, and could take a long time,” they wrote. “If Amazon were successful in changing the brand pricing model to be based on ‘net’ price versus the current gross model, we estimate a portion of rebates and other supply chain discounts currently being retained by plan sponsors, PBMs, and to a lesser degree drug distributors could pass back to consumers.
Many also believe that if there’s any distribution company that can navigate the complicated regulations around pharmaceutical sales and make it more efficient, it’s Amazon.
Last year, Amazon quietly won regulatory approval from 12 states to become a wholesale pharmaceutical distributor, but it has not yet won the necessary licenses. Amazon is expected to make a firm decision about whether or not it is going to pursue prescription drug sales by Thanksgiving.