Is Amazon set to disrupt pharma supply chains? 21 September 2017

According to press reports, Amazon is negotiating with pharmacy benefits managers (PBMs) in the US to agree terms of contract arrangements. PBMs negotiate prices with drug manufacturers and manage pharmacy benefits for insurers. The move was first mooted in May, but speculation has been growing in recent weeks. Around 80.0% of the US market is controlled by the biggest three PBMs, Express Scripts, CVS Health and UnitedHealth Group, but Amazon is said to be in discussions with mid-sized PBMs.

A PBM partnership, or establishing their own PBM is just one strategy that Amazon could follow. Other channels could be as an online pharmacy, a retail plus online pharmacy, building an internal PBM for its own employees or utilising its extensive logistics network as a distribution partner to pharmacies. Amazon itself is yet to make any comment.

Whilst seeking to challenge current distribution models, the reports suggest that it may take Amazon between 18 and 24 months to secure pharmacy licenses across all 50 states. Industry professionals are said to have ‘mixed feelings’ about Amazon’s intentions, on the one hand describing them, as a potential partner, while others are doubtful that the Company would seek to enter such a highly-regulated market where it would require significant scale.