How Amazon Will Disrupt the Prescription Drug Market

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Retail behemoth may yet prove to be a boon to consumers

 

Amazon put the idea of selling drugs directly to hospitals on hold earlier this year, but its move into the pharmacy business would be a strong bet to lower drug prices if and when it happens, according to experts.

There’s little doubt the consumer giant will eventually sell prescription drugs directly to consumers, according to a report by Joshua Cohen, an independent healthcare analyst.

And in what might be seen as a test run, Amazon announced a venture with Berkshire Hathaway and JPMorgan Chase to provide healthcare to the three companies’ employees.

CVS’s deal in December to buy Aetna and Walmart’s reported interest in Humana are signs that the industry is ripe for restructuring and consolidation, despite a federal judge last year blocking Aetna’s $34 billion bid to acquire Humana on antitrust grounds.

“Discounts or prices that are 20% to 25% cheaper than current retail pharmacy prices are possible,” said Cohen.

“The group most affected by an Amazon entrance would be the uninsured,” Cohen told PacerMonitor News. Some 27.6 million people are uninsured, according to data from the Kaiser Foundation.

“My assumption would be that Amazon probably will be selling non-specialty, generic drugs,” said Brian Duffant, vice president of Blue Path Solutions, a market access and health economics consulting firm in Los Angeles.  “They probably won’t be selling sophisticated drugs that treat cancer, rheumatoid arthritis or multiple sclerosis, at least not initially.” 

Other demographics that stand to gain from the sale of prescription drugs through Amazon include those who pay cash and workers with a high health insurance deductible.

“If your deductible is $2,000, you’re not likely to get much insurance relief for your prescription meds,” said Cohen. “You’re paying mostly out-of-pocket for prescription medication.”

Nearly 40% of Americans have a high insurance deductible, according to the National Center for Health Statistics.

“Amazon entering the fray increases the scope of how many people might be getting their medication by mail order,” said Gabriel Levitt, president and co-founder of  PharmacyChecker.com, an online pharmacy verification and drug price comparison company based in New York.

Mail-order services like Express Scripts are less expensive because medications are ordered and sold in large quantities. Last year, Express Scripts processed 1.4 billion in adjusted claims, according to its annual report.

“Right now, Express Scripts will give you a 90-day supply, and you only pay a two-month copay so it’s a great deal and for patients on drugs for chronic diseases like hypertension and cholesterol, it’s a lot of savings,” said Duffant.

Another upside is creating a way in which discounts and redemptions offered by drug manufacturers are passed onto the consumer. Currently, consumers are paying a gross price when they pay for drugs at a pharmacy.

“There’s not a mechanism right now for sharing those rebates from drug makers when patients buy their drugs from a pharmacy or even through Express Scripts,” Duffant told PacerMonitor News.

The Amazon/Berkshire/JPMorgan venture’s aim is to provide solutions for U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.

“The healthcare system is complex and we enter into this challenge open-eyed about the degree of difficulty,” said Amazon CEO Jeff Bezos in a statement online. “But hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families is worth the effort.”

Experts are hoping that the partnership will go the extra mile.

“Ideally, Amazon, JP Morgan and Berkshire Hathaway are testing on their employees what the net cost of a drug being sold on Amazon might look like with rebates and discounts deducted from the retail price,” Duffant said. “That would be a big upside for consumers.”

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