On Tuesday, Amazon unveiled its long-awaited Amazon Pharmacy service, sending healthcare stocks tumbling.
Through the service, customers get discounts and free two-day shipping if they're Prime members, plus the ability to search for drugs on Amazon similar to how they would shop for shoes and laundry detergent. Even so, Amazon's push deeper into healthcare stands to disrupt big parts of the industry. "Thus we would be buyers of any weakness today," the Evercore analysts said. Cardinal's stock fell 6% Tuesday, while Mckesson closed down 5.5%. AmerisourceBergen ended the day down by 3.6%.
Amazon's ability to provide a better customer experience could give it an advantage in mail-order over the dominant PBMs, which have "notoriously bad" customer interfaces, Raymond James analysts John Ransom and Aaron Kessler said in a note on Tuesday. Amazon, meanwhile,to answer customers' questions about medications 24 hours a day.
Amazon doesn't seem to be gunning for the role of the PBM as the middleman between patients and therapies, which leaves PBMs and health plans "intact," said Jefferies analyst Jared Holz. Still, health plans could benefit from Amazon's online pharmacy. Their members may have an easier time getting prescriptions, which could make them more likely to take their medicines. That could lead to better health outcomes and lower healthcare spending, Forrester's Trzcinski said.
Some investors are pumping the brakes on the selling spree, though. While the move is certainly a risk for the big pharmacy chains, RBC's Hie stopped short of calling this an existential crisis for pharmacies. "We believe these tailwinds support continued multiple expansion for CVS that should far outweigh likely headwinds from Amazon's broadened pharmacy push," Hie said.
"We believe this announcement clearly changes that narrative," they said in the report. Amazon's discounts are now available, via a discount card, in 50,000 pharmacies around the country, including CVS and Walgreens stores, they said. Companies like Hims or Ro that prescribe and ship medications to your door could see a slight benefit as getting drugs online goes mainstream, but ultimately could have to compete directly with Amazon.Analysts and experts credit Amazon with ushering in the widespread adoption of e-commerce shopping and selling habits with its Prime two-day shipping.
Guy is taking over what’s next JeffBezos Amazon dispensaries 🤔?