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Amazon Gets Into Prescription Drugs With “Amazon Pharmacy”

Amazon sets its sights on a new business.
(Tada Images)
(Tada Images)
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“Amazon.com Inc. is adding a pharmacy counter to its virtual store, a long-anticipated push deeper into health care that sent shares of traditional drug stores tumbling,” WSJ writes.

How’s it work? The company says, “Amazon customers will be able to purchase prescription medicine and upload their healthcare insurance information to the website while getting phone access to pharmacists.”

  • The service will ship “insulin, asthma inhalers and other common generic or branded medications, but won’t sell opioids or other drugs that are a higher risk for theft.”
  • On Tuesday, Shares of CVS fell 8.6%, Walgreens dropped 9.6% and Rite Aid led the pack with a 16% decrease. Drug distributors, which serve as middlemen in the industry, also fell, with Cardinal Health declining 6.5% and McKesson Corp. dropping 5.5%.

Also, Prime members will be eligible for discounts on generic prescription drugs, “suggesting the company may use its significant size to undercut the pricing of the established pharmacies and drugmakers in the market.”

Don’t Forget: Amazon signaled its interest in this space when it acquired online pharmacy PillPack in 2018, which “directly resulted” in the new pharmacy service, according to an Amazon spokeswoman.

  • The Jeff Bezos empire has also collaborated with pharma company Perrigo on over-the-counter medicines such as ibuprofen and hair-loss treatment.
  • U.S. prescription-drug sales at pharmacies hit a total of $336 billion two years ago, according to health research firm Iqvia Holdings.

The Bottom Line: CVS and Walgreens brushed off the move, citing the difficulty of entering the space. Some analysts say the offering’s customer-friendly nature could outdo others and lure new customers into the Prime loyalty program. But “success if far from ensured,” with dynamics already established between pharmacies, insurers and pharmacy-benefit managers.

Justin Oh:

This is exactly why we like Amazon ($AMZN) stock and why we’re able to keep buying it even when it looks expensive. Amazon uses its cash not for boring dividends (looking at you Apple), but to build and acquire new profitable businesses. 

That reinvested capital will deliver very high incremental returns for $AMZN investors that believe in the long-term transformational dominance of Amazon across its markets.

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