Amazon’s unrelenting drive to take over the world continues. The latest potential target of the online retailer’s ambitions: prescription drugs.
According to reports, Amazon is exploring entering the retail pharmacy market in the U.S., a $400bn a year business that many believe is ripe for disruption. While a final decision has apparently not yet been made, it’s not too early for pharma marketers to start considering the prospect of Amazon entering this huge market.
What it might mean for pharma marketers
The news of Amazon’s interest in selling prescription drugs has, for obvious reasons, spooked investors in major pharmacy players like CVS, Walgreens and Express Scripts, all of which risk being disrupted by Amazon the way so many other businesses have.
But pharmaceutical companies could find that Amazon’s disruption is a boon for them.
According to Adam Fein, president of Pembroke Consulting, one of the easiest ways for Amazon to enter the market would be to focus on patients who pay cash for generic and brand-name drugs.
Although prescription drug coverage is typically provided through health insurance plans – all plans offered under the Affordable Care Act (ACA) require it – a growing number of patients opt to pay cash for their prescription. As Doug Hirsch, the co-founder of GoodRx, a prescription drug pricing comparison service, explained to The Washington Post, this is a result of the fact that many patients have high deductibles and want to see if it’s possible to get better deals.
For pharma marketers, Amazon’s entry into this market could increase the importance of their direct-to-consumer marketing efforts.
Unfortunately, direct-to-consumer marketing is increasingly difficult for pharma companies and could potentially even become virtually impossible if some groups have their way. The American Medical Association supports a ban on direct-to-consumer ads that pitch prescription drugs and in California, a state legislator earlier this year introduced legislation that would ban the use of copay coupons when an inexpensive generic drug alternative was available.
A ban on direct-to-consumer ads would obviously complicate matters for pharma marketers, but until that day comes, one of the best ways they can prepare for the potential entry into the pharmacy market would be to evaluate their direct-to-consumer efforts in light of a changing landscape in which digital channels like social media increasingly trump established channels like television.
They should also consider that if Amazon does enter the market, it could have the effect of increasing pricing transparency, something they would be wise to embrace rather than fight.
Amazon as frenemy?
While Amazon’s entry into the retail pharmacy market could prove to be a net positive for pharma companies well-positioned to take advantage of it, there is also the potential that Amazon could become a frenemy.
How? As drug supply chain expert Stephen Buck, co-founder of Courage Health, pointed out, Amazon could eventually decide to manufacture its own generic medications. If that happened, pharma companies would find themselves competing with a company that also acts as, perhaps, one of their more important distribution channels.
This possibility too also demonstrates the importance of direct-to-consumer marketing, as pharma companies will want to do everything they can to establish the superiority of their drugs over generics that could one day be manufactured by Amazon.
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