Amazon telegraphs the next step in pharmacies


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Jeff Bezos famously remarked once that “Your margin is my opportunity”–meaning that Amazon will relentlessly target high-margin businesses as its means to expand. It started with books, a famously inefficient business where retailers could return unsold books for full price months after accepting shipments. Amazon moved to just about any other form of shippable retail product before turning to the high-margin technology industry with cloud computing, and then entertainment with video streaming.

But Amazon must keep conquering new industries to maintain its breakneck growth pace. FedEx is looking over its shoulder waiting for Amazon to get into the shipping business. CVS got that memo, which is why CVS acquired Aetna last year.

The shoe for CVS dropped recently when Amazon acquired PillPack. There is all sorts of speculation around how that might work out. Some think that Whole Foods chains might start offering pharmacy services. Others think Amazon wants to re-engineer the health care experience. There is a wide gap between those two ideas and maybe they are both accurate. The easiest way for Amazon to start would just be to start offering PillPack services online (Amazon Pharmacy?) while clearing all the regulatory and insurance hurdles to do more.

If Amazon does intend to re-engineer health care, it could scarcely choose an industry with higher margins or a lousier customer experience–at least in the US. And it is hard to argue with the acquisition of PillPack as the place for Amazon to start. PillPack has taken a small step of re-engineering medications, by packaging each dosage separately, delivering the medication to your house, and making refills painless. It plays to Amazon’s strengths in online delivery and improved customer experience.

Walmart has already focused on low-priced medication as its way into health care. CVS is diversifying from its pharmacy roots to urgent care (with Minute Clinic) and health insurance (with its Aetna acquisition). Don’t expect Walgreens and Rite Aid to sit still, even if they merely become acquisitions to the bigger players lining up to take the field against each other. But there are still many players not heard from yet, ranging from hospital systems, to pharmaceutical companies, to health insurers. And there is always the wild card of changes to US regulations that could go anywhere from a repeal of Obamacare to a move to a single-payer system to anything in between.

Buckle up, it should be a wild ride.

Republished with author's permission from original post.

Mike Moran
Mike Moran is an expert in internet marketing, search technology, social media, web personalization, and web metrics, who, as a Certified Speaking Professional, regularly makes speaking appearances. His previous appearances include keynote speaking appearances worldwide. Mike is the co-author of Outside-In Marketing and the best-selling Search Engine Marketing, Inc. He is also the author of the acclaimed internet marketing book, Do It Wrong Quickly: How the Web Changes the Old Marketing Rules. Mike founded and writes for Biznology® and writes regularly for other blogs.


  1. I’m glad to see Amazon enter the pharma distribution market. There’s a lot of shenanigans that goes on (see Valeant, Purdue Pharma, etc. etc.). Whether Amazon straightens that out, or gets sucked into the cesspool remains to be seen. As long as government regulations fail to constrain manufacturer abuses, and medicare fraud remains a profit engine throughout the supply chain, I’m not bullish on Amazon’s ability to keep its humongous hands out of the illegal-revenue cookie jar. For Amazon, this move is a large investment risk, and could stain its brand if they don’t stop [stuff] from happening that famously brought down other companies whose executives got bug-eyed crazy over the revenue and profit potential. Amazon has been there before in other markets. I’m sure they’re already staffing up their PR and marketing groups for the upcoming deluge of work.

    Amazon is one of the few companies that not only has the innovative chops to disrupt pharma retailing, but the infrastructure. I don’t think of their intention or ambition as “re-engineering healthcare” – that’s a Herculean task that’s way bigger than Amazon. Their strategic opportunity is figuring out how to provide what consumers want and need through improving healthcare, and then delivering it, in every sense of the word.

  2. Thanks for the comments, Andrew. I agree with you that the US healthcare business has not favored the pure of heart in recent years. But Amazon’s relentless focus on customer experience and lower margins at higher scale make them one to watch in this space. Thanks again for the feedback.


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