|Happy Thanksgiving? Amazon Controls the Fate of Pharmacy Benefit Managers|
Amazon.com ( AMZN) could decide very soon whether it wants to get into the business of selling prescription drugs online, a move that could threaten big pharmacy chains and some pharmacy benefit managers.
Wall Street has debated the likelihood of such a move for months. Earlier today, this very blog reported that analysts from Leerink, a health-care investment bank, were convinced that the e-commerce giant would enter the market in the next two years.
Now, CNBC.com’s Christina Farr reports that Amazon will make a decision by Thanksgiving, citing an email viewed by CNBC.com and a source familiar with the situation.
In the past year, Amazon has ramped up its hiring and consulted with dozens of people about a potential move into the pharmacy market. The consumables team, which includes groceries, kicked off the research, with the division's vice president, Eric French, taking the lead.
It brought on Mark Lyons from Premera Blue Cross to build an internal pharmacy benefits manager for its own employees, say multiple people familiar. According to one of the people, it's possible that the push into the broader drug supply chain hinges on its success with this effort.
In May, the company kicked off its search for a general manager to lead its pharmacy push, externally dubbed "healthcare."
Leerink analyst Ana Gupte also reported that Amazon has been hiring talent. She also says it is "in active discussions with mid-market PBMs and possibly even with large players such as Prime Therapeutics.”
What form Amazon’s business model might take remains to be seen. Leerink’s David Larsen says there are a variety of options, including a partnership with Express Scripts ( ESRX)
...AMZN has several options with regards to entering the space including: (1) AMZN may partner with middle market PBMs and become the mail fulfillment and on-line customer facing solution for those plans; (2) AMZN could buy a middle-market PBM or specialty pharmacy and sell its services direct to employer or plan; (3) AMZN could become a hub that lists prices of different pharmacies on its website, offering upfront and immediate discounts which could appeal to cash-pay or high-deductible plan members; or (4) AMZN could partner with ESRX (MP) in an effort to try and capture retail volumes. We believe that AMZN is in discussions with middle market PBMs now, including Prime, to try and assess how it can fit into the overall market. We also believe that AMZN has been hiring pharmacy services talent, who have expertise in pricing, and we suspect that AMZN has an internal group, operating in secrecy, to explore strategies in healthcare.
Gupte speculates that Amazon’s arrival in the market would most threaten Walgreens Boots Alliance( WBA), CVS ( CVS) and Wal-Mart Stores ( WMT), each of which operates a major pharmacy chain in the U.S.
Shares of Walgreens and CVS are both down sharply today, falling 4.5% and 3.6% respectively. Wal-Mart, meanwhile, has edged 0.7% lower.