Amazon (AMZN) took another step in the health space, announcing on Tuesday that Prime members will pay $5 a month for generic drugs.
The announcement is Amazon’s latest foray into the healthcare space following its 2018 acquisition of PillPack and last year’s announced acquisition of One Medical (ONEM). It’s also part of failed haven ventures, including JPMorgan and Berkshire Hathaway (BRK-A, BRK-B ), which are trying to manage health costs for large employers. Amazon previously offered six months of certain generic drugs for $6.
The announcement is Amazon’s “incremental pharmacy experiment,” Evercore ISI analysts said in a note Tuesday.
Generic discounting is not a new concept and has become an increasingly competitive field. GoodRx (GDRX) has been around for a while, followed by Walmart (WMT) and most recently billionaire and Shark Tank investor Mark Cuban, who launched Cost Plus Drugs last year. All of these programs pride themselves on the low cost of generic drugs.
Amazon goes a step further — it allows multiple prescriptions within a $5 monthly payment — but only for Prime members.
That’s why Nephron analyst Eric Percher notes, “While the $5 price point may provide savings for uninsured and underinsured patients taking multiple (generic) prescriptions, we don’t think it will be significantly lower than community and mail pharmacy pharmacies.” The prices offered, especially after factoring in the cost of the Prime membership.”
In a statement Tuesday, Dr. Vin Gupta, Amazon’s chief medical officer for pharmacies, pointed to an oft-cited statistic that inspired the new strategy, saying: “New medicines are not available. Supplements, supplements don’t get replenished.”
“Amazon Pharmacy is addressing these challenges by making medicines more accessible, affordable, and convenient. RxPass helps patients manage common health conditions—such as high blood pressure, anxiety, or acid reflux—by providing reliable access to commonly prescribed With the convenience and support customers have come to expect from Amazon,” Gupta added.
But there are a few exceptions. First, it does not apply to Medicare and Medicaid members. Second, it doesn’t include insulin — the top goal of the U.S. government’s Inflation Reduction Act. Third, it’s a small library of available drugs — according to Amazon, there are about 50 different drugs in the available list, treating 80 conditions.
“Overall, we continue to view Amazon as a relatively small player in pharmacy in the short to medium term, as branded drugs are much more difficult to innovate,” said Evercore analysts.
Nephron’s Percher likewise said Amazon’s move shouldn’t affect CVS (CVS) or Walgreens (WBA ), which are also big players in home delivery due to the pandemic.
But, Percher added, “it will be interesting to see if CVS and Walgreens and Walmart and Kroger adapt their low-cost generics in response to RxPass.”
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