What Amazon’s foray into the pharmacy business could mean for Big Pharma

“We bring the pharmacy to you.” 

That’s a recent advertising slogan from online shopping behemoth Amazon (NSDQ:AMZN), which unveiled its plan to deliver prescriptions in November. 

One of the key selling points of its service is prescription savings. The company promises that Amazon Prime members who pay without insurance can save anywhere from 80% of generics and 40% off brand name medications. 

The company could ultimately influence pricing dynamics throughout the industry, but it could be some time before the company makes its presence felt. “Amazon is at the very early stage of offering prescription drugs, and they are a long way off from having pricing power with Big Pharma,” said Avenue7Media CEO and e-commerce expert Jason Boyce. 

By selling common drugs at low prices, the company could put indirect pricing pressure on pharmaceutical manufacturers while also siphoning business from independent and retail pharmacies. 

Amazon could “create efficiencies and squeeze pharmacy retailers,” Boyce said. They could also become or purchase a pharmacy benefits manager. 

Given Amazon’s growing private label brand AmazonBasics, it’s also plausible that the company could purchase a generic drug producer, Boyce added. 

To deal with the situation, pharmaceutical manufacturers “must both focus on the best possible cooperation with all players, including Amazon Pharmacy, and find a way to strengthen their direct connection to the customer and limit their dependence on Amazon Pharmacy,” according to an e-mailed statement from Simon-Kucher & Partners.

But many powerful tech companies have stumbled when attempting to enter the healthcare market, an industry that often has a steep learning curve. “I think Amazon will learn fast that pharma has a lot more roadblocks than other categories they’ve entered,” Boyce said. “However, they will keep learning and growing and they won’t stop.”