Dive Brief:
- Amazon's filings with state pharmaceutical regulators reveal the
company is not looking to sell drugs on its marketplace, according to
reports from CNBC and the St.
Louis Post-Dispatch.
- The filings to distribute to at least 12 states from three facilities
in Indiana reveal Amazon could distribute medical devices,
supplies, gas or pharmaceuticals from the warehouses. However, to distribute
drugs the company would also have to pursue
a deal with a pharmaceutical
benefits manager.
- The biggest
rebuke of rumors on
Amazon's pharmaceutical dreams came from correspondence with regulators in
Tennessee and Indiana, where the company explicitly said it would not
"store or ship drugs."
Dive Insight:
Spinners have spread rumors
Amazon will soon disrupt the pharmaceutical supply chain, but it turns out the
opposite is true: drugs, at least, are safe from e-commerce — but medical
distributors are not so lucky.
Companies like McKesson and
Cardinal Health have long had a stranglehold on the medical supply distribution
market, serving as middlemen between countless suppliers and the dozens of
hospitals and clinics they serve. As healthcare providers continue to
consolidate, so does suppliers' opportunities to sell to big clients.
Or they did until the rise of
e-commerce. Amazon's rise has transformed buying habits so much, digital
shopping began to shape business-to-business procurement. As digital tools
became commonplace, previously limited suppliers began list their products on
online marketplaces as well as catalogs or at trade show booths. At the very
least, e-commerce opens an additional revenue channel for sales-driven
companies.
Using that strategy, Amazon
has broken into the apparel, electronics and food industries. It should be no
surprise the company is now entering the medical supply field. After all, the
company is only limited by its fulfillment capabilities, and the number of
brands it can incentivize to join its marketplace. Given the highly competitive
medical supply market, the latter should not be a problem. And the complexities
of cold storage facilities could only hold off the giant for so long.
By that logic, it would not be
surprising if Amazon did, eventually, break into the pharmaceutical space too.
After all, the company is known for its long-term strategy and preparation, and
it already applied for a license to distribute drugs in some states although it
will not pursue the strategy at first, per the recent report.
However, the timing of such a
move will likely depend, first, on the company's success in the medical supply
industry. If it can successfully navigate the regulations and build up cold
chain storage expertise, it is not too far a reach to move into pharmaceutical
distribution. Even then, Amazon must still file for additional licenses
and strike a deal with benefits managers.
Nonetheless, pharmaceutical
companies and healthcare providers alike should watch the e-commerce giant's
healthcare experiment with interest, as its success will likely anticipate
further expansions — either in distribution or logistics.
