Analysts: Amazon Will Start Online Drug Sales

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It is almost a certainty that Amazon.com will enter the business of prescription drug sales by 2019, said a pair of Wall Street analysts. This will pose direct threats to the largest U.S. brick and mortar pharmacy chains.

It is not a matter of if, but of when, said one of the analysts in his report this week to clients. The report said the analysts expect an announcement would be made in 1 to 2 years.

Amazon has for a long time had interest in selling prescription drugs, which is an industry with numerous middlemen, opaque pricing and long supply chains.

During the 1990s, Amazon invested in Drugstore.com and CEO of Amazon Jeff Bezos was on the startup’s board.

Eventually Drugstore.com was purchased by Walgreens and shuttered in 2016 so it could focus on the company’s branded website.

The analysts believe that Amazon is holding active talks with midsize benefit managers and quite possibly larger players as well.

One news network, CNBC on Friday reported Amazon could decide about online prescription drug sales prior to Thanksgiving, but the news network did not release who its sources were.

If the e-commerce giant enters the pharmacy market, it would become an immediate threat in the short term to retail drugstore chains like Walgreens Boots Alliance and CVS Health, said the analysts.

After the news, Walgreens shares fell, closing on Friday down 4.9%, while CVS shares lost as well on the news.

Amazon could grow quickly in sales of prescription drugs and their distribution, especially if an acquisition was made of a drug benefit manager and used that acquisition to create a price model that was more transparent, said one industry analyst.

Pharmacy benefit managers (PBMs) administer the drug benefits at employers as well as health plans, and processing prescriptions dispensed by pharmacies. Currently, the final prices of many medications get negotiated in deals behind closed doors between PBMs and drug makers.

The largest three drug benefit managers are Express Scripts, OptumRx and CVS, and the three process nearly 70% of the prescription in the U.S.

Shares of Express Scripts were down 2.6% Friday. The DPM would not comment when asked about Amazon possibly selling prescription drugs.

During the summer, in an earnings call, CEO at Express Scripts Timothy Wentworth said that he would have interest in establishing a partnership with Amazon, should the online behemoth decide to join the prescription drug selling space.

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