Part 4 Amazon Pharmacy has also struggled to diff
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Posted On: 11/27/2023 3:58:44 PM
Part 4
Amazon Pharmacy has also struggled to differentiate itself from what’s already available at CVS, Walmart or Mark Cuban Cost Plus Drug Co. The online drug store was built atop PillPack, which pioneered mail-order delivery. It uses a highly automated system to sort medications into packets strung together into a long, segmented ribbon and ship them to customers. Patients tear open a pack when it’s time for the next dose until the roll is finished, at which point a new one arrives—a feat of coordination PillPack orchestrated among insurance companies, drug suppliers and doctors. For customers, the PillPack model alleviated the anxiety of keeping one’s pills straight.
Analysts generally applauded the acquisition, but the PillPack integration got off to an inauspicious start. After merging existing personnel with PillPack’s to form a new online pharmacy division, the company asked Nader Kabbani to lead the unit. The longtime Amazon executive, who had worked on logistics and the Kindle e-reader, lacked the health-care expertise to make major decisions without consulting PillPack founders TJ Parker and Elliot Cohen. Months later, Parker started reporting to the company’s retail chief instead. Kabbani, who left Amazon earlier this year, declined to comment.
At the same time, Amazon wanted to display meds online much the way it does regular merchandise, with transparent pricing that included what kind of discount it was offering. That was never going to be easy because drugs, highly regulated products whose prices vary depending on the manufacturer or insurer, didn’t fit neatly into the software powering Amazon’s retail website. And when Amazon Pharmacy launched in November 2020—29 months after the PillPack acquisition—it lacked some of the price-transparency features executives wanted.
The service’s prescription discount card also relied on drug prices negotiated by InsideRX, a unit of pharmacy giant Express Scripts Inc., the very definition of an industry incumbent. As such, the site was a disappointment to some health industry critics. “Perhaps Amazon will one day become a true disrupter,” Adam Fein, a consultant who studies pharmaceutical economics, wrote after the launch. “For now, Amazon is choosing to join the drug channel, not fundamentally change it.”
Eventually, Amazon figured out how to show patients the price of a specific drug—a true innovation, Parker says. But it wasn’t long before rivals were offering similar tools. In August, GoodRx debuted a tool that lets doctors check the price before they prescribe the drug—also taking the patient’s insurance coverage into account.
Since then, Amazon has added sweeteners to persuade Prime subscribers to use the pharmacy service or sign up with One Medical. RxPass, which launched in January, ships patients any of a list of 53 generic medications for $5 a month. Amazon says the all-you-can-prescribe plan has drawn attention to its pharmacy arm, but the company isn’t the first to try this. Walmart and Mark Cuban Cost Plus, among others, already offer cheap generics. CVS and Walgreens, meanwhile, have stores on thousands of street corners, offering the prospect of on-the-spot help when someone is ill. The fine print of the Amazon Pharmacy website even recommends that people with urgent needs visit a physical pharmacy. Amazon has yet to open one of those, though it’s testing speedy delivery of medicine as part of drone-delivery trials in Texas.
Sensor Tower, a market intelligence firm, estimates that monthly active users of the One Medical smartphone app are up 16% in the months since the deal, compared with the same period a year earlier. Gauging Amazon Pharmacy’s progress is difficult. Amazon says the unit doubled its active customers from 2022 to 2023, without providing more specific data. Three people who worked for PillPack say demand after Amazon Pharmacy’s launch fell short of the company’s expectations. “It really hasn’t made a big dent,” said Lisa Phillips, principal analyst with Insider Intelligence, which, relying on data from Kantar MARS, estimates that 8% of US drug purchasers have used Amazon. “I don’t think anybody is scared of it anymore.”
Amazon Pharmacy has also struggled to differentiate itself from what’s already available at CVS, Walmart or Mark Cuban Cost Plus Drug Co. The online drug store was built atop PillPack, which pioneered mail-order delivery. It uses a highly automated system to sort medications into packets strung together into a long, segmented ribbon and ship them to customers. Patients tear open a pack when it’s time for the next dose until the roll is finished, at which point a new one arrives—a feat of coordination PillPack orchestrated among insurance companies, drug suppliers and doctors. For customers, the PillPack model alleviated the anxiety of keeping one’s pills straight.
Analysts generally applauded the acquisition, but the PillPack integration got off to an inauspicious start. After merging existing personnel with PillPack’s to form a new online pharmacy division, the company asked Nader Kabbani to lead the unit. The longtime Amazon executive, who had worked on logistics and the Kindle e-reader, lacked the health-care expertise to make major decisions without consulting PillPack founders TJ Parker and Elliot Cohen. Months later, Parker started reporting to the company’s retail chief instead. Kabbani, who left Amazon earlier this year, declined to comment.
At the same time, Amazon wanted to display meds online much the way it does regular merchandise, with transparent pricing that included what kind of discount it was offering. That was never going to be easy because drugs, highly regulated products whose prices vary depending on the manufacturer or insurer, didn’t fit neatly into the software powering Amazon’s retail website. And when Amazon Pharmacy launched in November 2020—29 months after the PillPack acquisition—it lacked some of the price-transparency features executives wanted.
The service’s prescription discount card also relied on drug prices negotiated by InsideRX, a unit of pharmacy giant Express Scripts Inc., the very definition of an industry incumbent. As such, the site was a disappointment to some health industry critics. “Perhaps Amazon will one day become a true disrupter,” Adam Fein, a consultant who studies pharmaceutical economics, wrote after the launch. “For now, Amazon is choosing to join the drug channel, not fundamentally change it.”
Eventually, Amazon figured out how to show patients the price of a specific drug—a true innovation, Parker says. But it wasn’t long before rivals were offering similar tools. In August, GoodRx debuted a tool that lets doctors check the price before they prescribe the drug—also taking the patient’s insurance coverage into account.
Since then, Amazon has added sweeteners to persuade Prime subscribers to use the pharmacy service or sign up with One Medical. RxPass, which launched in January, ships patients any of a list of 53 generic medications for $5 a month. Amazon says the all-you-can-prescribe plan has drawn attention to its pharmacy arm, but the company isn’t the first to try this. Walmart and Mark Cuban Cost Plus, among others, already offer cheap generics. CVS and Walgreens, meanwhile, have stores on thousands of street corners, offering the prospect of on-the-spot help when someone is ill. The fine print of the Amazon Pharmacy website even recommends that people with urgent needs visit a physical pharmacy. Amazon has yet to open one of those, though it’s testing speedy delivery of medicine as part of drone-delivery trials in Texas.
Sensor Tower, a market intelligence firm, estimates that monthly active users of the One Medical smartphone app are up 16% in the months since the deal, compared with the same period a year earlier. Gauging Amazon Pharmacy’s progress is difficult. Amazon says the unit doubled its active customers from 2022 to 2023, without providing more specific data. Three people who worked for PillPack say demand after Amazon Pharmacy’s launch fell short of the company’s expectations. “It really hasn’t made a big dent,” said Lisa Phillips, principal analyst with Insider Intelligence, which, relying on data from Kantar MARS, estimates that 8% of US drug purchasers have used Amazon. “I don’t think anybody is scared of it anymore.”
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