Today Amazon opened an online pharmacy that allows customers to order medication or prescription refills and get them delivered to their front door within a few days.
The potential impact of Amazon’s arrival in the pharmaceutical industry rippled through that sector immediately. On Tuesday, CVS Health Corp, Walgreens, and Rite Aid’s stocks all tumbled.
The big chains rely on their pharmacies for a steady flow of shoppers who may also grab a few things on their way out. All of them have increased their online services and advertised their abilities to deliver prescriptions and other goods as the COVID-19 pandemic continues to push consumers to stay home. However, Amazon.com has mastered these things, and its online store is infinitely larger, with millions of loyal shoppers already buying books, TVs, and just about anything else you could imagine.
A Citi Research analyst said in a note that “The news represents a disruption to the system and competitive threat that will likely shift scripts away from the retail channel.”
Even though Amazon has grown over the years, they do have a history of disruption. In 1995 they first launched as an online bookstore, which pushed other booksellers to sell online. However, those that couldn’t keep up went out of business, like the Borders bookstore chain, which disappeared in 2011.
The purchase of Whole Foods three years ago sent supermarket stocks spiraling, but many have been able to hold their own against Amazon, offering home delivery and curbside pickup.
Amazon just has their hands in everything, and they’re starting to become a threat to shipping companies, delivering more than half of its own packages itself. Vans stamped with the Amazon logo have become as common as the sight of a UPS truck.
The company said its online pharmacy would offer commonly prescribed medications in the U.S., including creams, pills, as well as medications that need to stay refrigerated, like insulin. Shoppers have to set up a profile on Amazon’s website and have their doctors send prescriptions there. Some prescriptions like opioids will not be shipped since some medications are at a high risk of being abused.
Most insurances will be accepted, but Prime members who don’t have insurance can also buy the generic or brand name drugs from Amazon for a discount. They can also get discounts at 50,000 physical pharmacies around the country at Costco, CVS, Walgreens, Walmart, and other stores.
John Boylan, an analyst who covers Walgreens for Edward Jones, said that it could be appealing to the uninsured or for the people who have plans that make them pay a high deductible before their coverage starts. He said Amazon’s move would mostly affect smaller drugstores that don’t have either the retail giant’s purchasing power or deals that major drugstore chains have with insurers to funnel patients to their stores for prescriptions.
The company has been eyeing the healthcare industry for some time now. It spent $750 million just two years ago to buy the online pharmacy PillPack, which organizes medication in packets by what time and day they need to be taken. Amazon said that PillPack would continue focusing on shipping medication to people with chronic conditions.
CVS and Walgreens have since opened thousands of drugstores nationwide to get closer to their customers. They have been trying to adjust to the rise of online shopping by offering same-day deliveries in other markets.
Walgreens also has a partnership with FedEx for a delivery service that takes a day or two. Their CEO, Stefano Pessina, told analysts that in July, the company has seen an “unprecedented demand” for both home delivery and online services as the COVID-19 pandemic continues to unfold.
Both companies’ shares were down 7% and more than 8% respectively in late-morning trading while broader indexes slipped. Rite Aid Corp.’s stock plunged more than 14%. Amazon shares edged up less than 1%.
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