"Amazon Is Already Undercutting Prices on Over-the-Counter Pills"

[Kevin.Mero]

Bloomberg News reported Amazon “is already undercutting” pharmacies on over-the-counter drugs. The article reports that “median prices for over-the-counter, private-brand medicine sold by Walgreens Boots Alliance Inc. and CVS Health Corp. were about 20 percent higher than Basic Care, the over-the-counter drug line sold exclusively by Amazon, according to a report Friday by Jefferies Group analysts.”
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[Digsbe]

This isn't really new news. WAG and CVS already cost more than most other retailers for generics. The price is higher due to convenience. I get 365 tablets of loratadine at Costco for $7.

 

[Grampus Mud]

Isn't it illegal for the web services division to be subsidizing the retail side that basically makes no profit?

 

[Son_Goku]

You do realize that Amazon has been under-cutting everyone since its inception, right?

 

[wucool33]

You do realize that Amazon has been under-cutting everyone since its inception, right?

Not on pet foods it costs way more to buy from Amazon!

 

[Kevin.Mero]

You do realize that Amazon has been under-cutting everyone since its inception, right?

Not that my opinion matters but personally I'm no fan of Amazon and feel they are not good corporate citizens. Thus far they have adversely affected package delivery and logistics, grocery stores, bookstores, food delivery businesses, department stores, high-end department stores, consumable manufacturers, electronic retailers, healthcare companies ... and now Pharmacy!

 

[owlegrad]

Not that my opinion matters but personally I'm no fan of Amazon and feel they are not good corporate citizens. Thus far they have adversely affected package delivery and logistics, grocery stores, bookstores, food delivery businesses, department stores, high-end department stores, consumable manufacturers, electronic retailers, healthcare companies ... and now Pharmacy!

That's fair, but I still love my Kindle.

 

[BidingMyTime]

That's fair, but I still love my Kindle.

Being old school, I was reluctant to try a Kindle. But once I did, wow! I wouldn't be without it now.

 

[owlegrad]

Being old school, I was reluctant to try a Kindle. But once I did, wow! I wouldn't be without it now.

Yup, that was my exact experience. I was totally like “read a book without paper? Bah, never!”

Now I greatly prefer it to physical books.

 

[Modest_anteater]

Bloomberg News reported Amazon “is already undercutting” pharmacies on over-the-counter drugs. The article reports that “median prices for over-the-counter, private-brand medicine sold by Walgreens Boots Alliance Inc. and CVS Health Corp. were about 20 percent higher than Basic Care, the over-the-counter drug line sold exclusively by Amazon, according to a report Friday by Jefferies Group analysts.”
Terms of Service Violation

This is only the begining. Let me remind everyone Amazon.com was once only a book seller. Bezo's is a genius and enters into a market slowly then decimates the market. Healthcare is like a big, fat gravy train with everyone milking the insurance industry and federal government for as much as they want. Amazon will bring transparency to the market. It's extermely clear to me why they bought wholefoods. They are looking to get into the pharmacy game and they will decimate the industry. I'm talking 1 pharmacist 12 tech mega pharmacies where the techs check each other. Or maybe 10 pharmacists based in Seattle operating 50 pharmacys remotely that are only staffed by techs and pharmacy vending machines. Please talk to the pharmacist, he will appear on the giant 50 inch LCD screen shortly to counsel you on your Atorvastatin.

I'm excited and blessed to have the privilege to witness what Bezo will do to the industry, even if it means I will no longer have a job. That's a small price to pay for being able to watch this all unfold. Luckily Popcorn is cheap at walmart because I'm going to need a lot of it over the next few years.

 

[Old Timer]

Not that my opinion matters but personally I'm no fan of Amazon and feel they are not good corporate citizens. Thus far they have adversely affected package delivery and logistics, grocery stores, bookstores, food delivery businesses, department stores, high-end department stores, consumable manufacturers, electronic retailers, healthcare companies ... and now Pharmacy!

This just shows how ignorant you are about how society works. People will shop where they feel they get the best value. Corporate Citizenship has nothing to do with it. If it did, Apple would be out of business. The first I-Pod had a hard wired battery that died right after the warranty expired. They were shamed into replacing them. Then they did the same thing with first I-Phone. Apple is a jerky company. Great products, People like the combination of convenience, selection, price and service they get from Amazon and that's why they are successful. People vote withe their wallets and Amazon is a clear winner

 

[Old Timer]

This is only the begining. Let me remind everyone Amazon.com was once only a book seller. Bezo's is a genius and enters into a market slowly then decimates the market. Healthcare is like a big, fat gravy train with everyone milking the insurance industry and federal government for as much as they want. Amazon will bring transparency to the market. It's extermely clear to me why they bought wholefoods. They are looking to get into the pharmacy game and they will decimate the industry. I'm talking 1 pharmacist 12 tech mega pharmacies where the techs check each other. Or maybe 10 pharmacists based in Seattle operating 50 pharmacys remotely that are only staffed by techs and pharmacy vending machines. Please talk to the pharmacist, he will appear on the giant 50 inch LCD screen shortly to counsel you on your Atorvastatin.

I'm excited and blessed to have the privilege to witness what Bezo will do to the industry, even if it means I will no longer have a job. That's a small price to pay for being able to watch this all unfold. Luckily Popcorn is cheap at walmart because I'm going to need a lot of it over the next few years.

This is much harder than you realize. This is an industry with a gross margin that is less than 25%. Closer to 20. So there is not a great deal of wiggle room. Secondly, it is a highly regulated field. Finally, CVS is a bigger company than Amazon. They will always be able to buy better than Amazon. The advantage Amazon has is they are willing to go into a field and lose money until they figure out who that market works. I'm not saying they won't be successful, I'm saying this is a much harder gig than punching out Barnes and Noble...

 

[Modest_anteater]

This is much harder than you realize. This is an industry with a gross margin that is less than 25%. Closer to 20. So there is not a great deal of wiggle room. Secondly, it is a highly regulated field. Finally, CVS is a bigger company than Amazon. They will always be able to buy better than Amazon. The advantage Amazon has is they are willing to go into a field and lose money until they figure out who that market works. I'm not saying they won't be successful, I'm saying this is a much harder gig than punching out Barnes and Noble...

"CVS is a bigger company than Amazon. "

No man. Not even close. Amazon could BUY CVS tomorrow with CASH and is MUCH MUCH bigger than baby CVS.

Amazon.com Market Cap 865.85 BILLION DOLLARS as of 7/12/2018
CVS Market Cap 70.12 BILLION

This means Amazon.com is worth more than 12x and is 12 times bigger than CVS.

Have you ever met a CVS network engineer or programer? I have. They are toddlers compared to the computer programers Amazon has. What does Bezos know about books? what does he know about rockets? That's what they said.

Amazon WILL CRUSH CVS. I see them buying Walgreens by 2020 and then using Walgreens to absolutely destroy those archaic, old fashioned Rhode island *****s who can barely write a FOR loop.

Here is CVS's stock over the last five years. Notice how it's down 50%? Now look at Amazon's stock. All the investors know what is going to happen.

 

[PharFromNormal]

"CVS is a bigger company than Amazon. "

No man. Not even close. Amazon could BUY CVS tomorrow with CASH and is MUCH MUCH bigger than baby CVS.

Amazon.com Market Cap 865.85 BILLION DOLLARS as of 7/12/2018
CVS Market Cap 70.12 BILLION

This means Amazon.com is worth more than 12x and is 12 times bigger than CVS.

Have you ever met a CVS network engineer or programer? I have. They are toddlers compared to the computer programers Amazon has. What does Bezos know about books? what does he know about rockets? That's what they said.

Amazon WILL CRUSH CVS. I see them buying Walgreens by 2020 and then using Walgreens to absolutely destroy those archaic, old fashioned Rhode island *****s who can barely write a FOR loop.

View attachment 237016

Here is CVS's stock over the last five years. Notice how it's down 50%? Now look at Amazon's stock. All the investors know what is going to happen.

I believe what they meant by “bigger” was a much bigger share of the marketplace and much bigger purchaser of drug product. Since they buy so much, they are able to leverage this and secure cheaper acquisition cost by buying “in bulk”. When it comes to purchasing prescription only drug product, amazon (via pillpack) would be tiny. Additionally their current wholesaler might be purchased by Walgreens. If Walgreens purchased them, and the current relationship remained the same, amazon would be doing no better than Walgreens (likely worse) when it comes to acquisition cost. However, as already mentioned, this can mean absolutely nothing to Amazon due to their willingness to sell below cost and not see cost of goods as a starting place for pricing.

 

[Old Timer]

"CVS is a bigger company than Amazon. "

No man. Not even close. Amazon could BUY CVS tomorrow with CASH and is MUCH MUCH bigger than baby CVS.

Amazon.com Market Cap 865.85 BILLION DOLLARS as of 7/12/2018
CVS Market Cap 70.12 BILLION

This means Amazon.com is worth more than 12x and is 12 times bigger than CVS.

Have you ever met a CVS network engineer or programer? I have. They are toddlers compared to the computer programers Amazon has. What does Bezos know about books? what does he know about rockets? That's what they said.

Amazon WILL CRUSH CVS. I see them buying Walgreens by 2020 and then using Walgreens to absolutely destroy those archaic, old fashioned Rhode island *****s who can barely write a FOR loop.

View attachment 237016

Here is CVS's stock over the last five years. Notice how it's down 50%? Now look at Amazon's stock. All the investors know what is going to happen.

Look at the Fortune 500 CVS is above Amazon by 7 billion in sales. Almost all of that sales involves purchasing pharmaceutical products. Amazon cannot out purchase CVS. Market cap does not play apart in company size. Merck only cares who will sell the most Januvia.......

 

[PharFromNormal]

Look at the Fortune 500 CVS is above Amazon by 7 billion in sales. Almost all of that sales involves purchasing pharmaceutical products. Amazon cannot out purchase CVS. Market cap does not play apart in company size. Merck only cares who will sell the most Januvia.......

Don’t be fooled by the financial statements. CVS Health revenues reflect consolidated revenues in all segments. The number quoted on fortune list includes some double counting. Caremark client pays Caremark, caremark pays CVS pharmacy. Revenue counted twice... more accurate number would probably be after the inter segment eliminations. That number which you can find is much greater than $7B.... but I do agree CVS has way more revenue and purchasing power related to pharmaceuticals.

 

[Kevin.Mero]

This just shows how ignorant you are about how society works. People will shop where they feel they get the best value. Corporate Citizenship has nothing to do with it. If it did, Apple would be out of business. The first I-Pod had a hard wired battery that died right after the warranty expired. They were shamed into replacing them. Then they did the same thing with first I-Phone. Apple is a jerky company. Great products, People like the combination of convenience, selection, price and service they get from Amazon and that's why they are successful. People vote withe their wallets and Amazon is a clear winner

With all due respect I understand how society works, I have been a self-employed business person for 40+ years. I've owned and operated multiple businesses that have grossed millions of dollars and employed many people. I understand how some businesses choose to get ahead. But I also know you meet the same people on the way down the ladder that you met on the way up. I take no pride in stepping on another person just so I could get ahead. I wish I could say the same about the brain trust behind the build-up of the schools of pharmacy.

 

[Old Timer]

Don’t be fooled by the financial statements. CVS Health revenues reflect consolidated revenues in all segments. The number quoted on fortune list includes some double counting. Caremark client pays Caremark, caremark pays CVS pharmacy. Revenue counted twice... more accurate number would probably be after the inter segment eliminations. That number which you can find is much greater than $7B.... but I do agree CVS has way more revenue and purchasing power related to pharmaceuticals.

Not really. That money would be spent by Caremark regardless, so just because another division of the corporate parent gets the sale, does not diminish the sale at all......

 

[PharFromNormal]

Not really. That money would be spent by Caremark regardless, so just because another division of the corporate parent gets the sale, does not diminish the sale at all......

I respectfully disagree. If Caremark did away with mchoice and/or lost their CVS pharmacy network, they would lose clients and revenue. How could a caremark member get a prescription filled at a non-cvs if they are in a restricted network that only permits CVS... Bonkers if you don’t think both divisions are synergistic to the other. It works BOTH ways although most like to only think of the Caremark driving CVS...

 

[Old Timer]

I respectfully disagree. If Caremark did away with mchoice and/or lost their CVS pharmacy network, they would lose clients and revenue. How could a caremark member get a prescription filled at a non-cvs if they are in a restricted network that only permits CVS... Bonkers if you don’t think both divisions are synergistic to the other. It works BOTH ways although most like to only think of the Caremark driving CVS...

IF, the greatest word in the English language. I didn't say they were not synergistic. I said you can't say the money the retail side gets from PBM side doesn't count.

 

[Kevin.Mero]

This is only the begining. Let me remind everyone Amazon.com was once only a book seller. Bezo's is a genius and enters into a market slowly then decimates the market. Healthcare is like a big, fat gravy train with everyone milking the insurance industry and federal government for as much as they want. Amazon will bring transparency to the market. It's extermely clear to me why they bought wholefoods. They are looking to get into the pharmacy game and they will decimate the industry. I'm talking 1 pharmacist 12 tech mega pharmacies where the techs check each other. Or maybe 10 pharmacists based in Seattle operating 50 pharmacys remotely that are only staffed by techs and pharmacy vending machines. Please talk to the pharmacist, he will appear on the giant 50 inch LCD screen shortly to counsel you on your Atorvastatin.

I'm excited and blessed to have the privilege to witness what Bezo will do to the industry, even if it means I will no longer have a job. That's a small price to pay for being able to watch this all unfold. Luckily Popcorn is cheap at walmart because I'm going to need a lot of it over the next few years.

One of the only flaws in your doomsday scenario is you'll never reach critical mass on Techs. While organizational leadership was behind the push for the all-PharmD and build-up of the schools of pharmacy, they're not going to be able to accomplish the same with the Techs ... unless they can find a way to group the cohort as a whole. This is something I think about 168 hours per week!

 

[PharFromNormal]

IF, the greatest word in the English language. I didn't say they were not synergistic. I said you can't say the money the retail side gets from PBM side doesn't count.

You actually didn’t say that... you said caremark would “spend that money regardless”. However, we are speaking of revenues of CVS health, not of CVS pharmacy. If you want to compare amazon to CVS pharmacy then amazon blows them out of the water. If you want to compare Caremark alone to amazon, amazon still wins. Caremark wouldn’t be collecting the initial revenue (from the client) if they weren’t going to have a significant segment cost that would also be Cvs pharmacy revenues. Thus the double counting that should be factored in when analyzing revenues with a vertical business. If not you could create a conglomerate with multiple segments in your company to cost account every movement of good or service within the company and count it as revenues all along the way...

 

[pezdispenser]

The Fortune 500 list is ranked on revenues (sales) which doesn't tell the complete picture of a company, but anyway note these companies:

#6 McKesson $199 billion
#7 CVS $185 billion
#8 Amazon $178 billion
#12 AmerisourceBergen $153 billion
#14 Cardinal $130 billion

Drugs are clearly a big business based on sales, and Amazon is coming for a piece of that pie. I don't think it matters about buying power, PBM contracts, etc. Amazon will find some way to disrupt this industry big time.

 

[Modest_anteater]

The Fortune 500 list is ranked on revenues (sales) which doesn't tell the complete picture of a company, but anyway note these companies:

#6 McKesson $199 billion
#7 CVS $185 billion
#8 Amazon $178 billion
#12 AmerisourceBergen $153 billion
#14 Cardinal $130 billion

Drugs are clearly a big business based on sales, and Amazon is coming for a piece of that pie. I don't think it matters about buying power, PBM contracts, etc. Amazon will find some way to disrupt this industry big time.

I'm already custom tailoring my resume to be a perfect fit for Amazon. I plan on cold-emailing Amazon with my resume when I gradtuate and asking to be one of the first pharmacists to work for the company. Look if you can't beat Bezos, you should try to join him. Always best to be on the winning side.

 

[PharFromNormal]

The Fortune 500 list is ranked on revenues (sales) which doesn't tell the complete picture of a company, but anyway note these companies:

#6 McKesson $199 billion
#7 CVS $185 billion
#8 Amazon $178 billion
#12 AmerisourceBergen $153 billion
#14 Cardinal $130 billion

Drugs are clearly a big business based on sales, and Amazon is coming for a piece of that pie. I don't think it matters about buying power, PBM contracts, etc. Amazon will find some way to disrupt this industry big time.

I think we can all agree that Amazon poses a big threat as their primary objectives do not seem to be led by profit. As a consumer and layperson this can be seen as very desirable that they value my business over desire for profit. however for our industry where the biggest complaints are around margin erosion and how that is translating into working conditions, job opportunity, and wages due to the desire to protect whatever profit is left... this can be seen as very disruptive. When I hear pharmacists say “I want to work for amazon” I kind of chuckle, as their employees are also not their focus, again it’s the customer. If you think the chains are bad at getting the most out of you, I think you have little idea what amazon would want to do in the efforts of reducing cost to fill. They are kings of logistics. Pharmacist cost/time is an extremely costly component in a process that they’ll try to aggressively reduce the rate on and/or reduce exposure on to in turn help reduce either the cost to the customer or help offset however underwater they are willing to operate at.

 

[owlegrad]

You actually didn’t say that... you said caremark would “spend that money regardless”. However, we are speaking of revenues of CVS health, not of CVS pharmacy. If you want to compare amazon to CVS pharmacy then amazon blows them out of the water. If you want to compare Caremark alone to amazon, amazon still wins. Caremark wouldn’t be collecting the initial revenue (from the client) if they weren’t going to have a significant segment cost that would also be Cvs pharmacy revenues. Thus the double counting that should be factored in when analyzing revenues with a vertical business. If not you could create a conglomerate with multiple segments in your company to cost account every movement of good or service within the company and count it as revenues all along the way...

So the payment from the Caremark side to the CVS pharmacy side should count as an expense on the Caremark side but should not count as revenue on the CVS pharmacy side?

Interesting. Accounting always confused me to be honest.

 

[PharFromNormal]

So the payment from the Caremark side to the CVS pharmacy side should count as an expense on the Caremark side but should not count as revenue on the CVS pharmacy side?

Interesting. Accounting always confused me to be honest.

When evaluating as separate entities they should be counted on both sides. When evaluating as a combined entity, depending on the analysis intersegment eliminations should be factored into the discussion. If Caremark’s mail order and speciality pharmacy were carved out of the pbm segment, you’d also impact the total “revenues” which would be inappropriate. A vertical company is difficult to compare against peers that only comprise of one or different layers. It’s my personal belief that CVS probably doesn’t like reporting out segment performance but in order to appease investors, or perhaps the SEC, it needs to do a public “horizontal” comparison can be made. If CVS health is intentionally accepting lower rates in their retail arm to give their pbm arm stronger selling proposition this would materially impact the stand alone retail segments margin numbers making it potentially look soft vs competitors when in reality it might be intentional. This leads to constant investor education.

 

[PharFromNormal]

The whole notion is to provide a more clear picture of true revenues recieved from a seperate corporate entity. I think CVSH had like $30B or something in eliminations last year (you can check their financials on their website). This is >10% total revs so it’s reported per GAAP. Some analysts not privvy to the actual non-reported details use these figures to ballpark % of CVS pharmacy scripts that are caremark. For anyone to improve their knowledge of GAAP... via investopedia...


BREAKING DOWN 'Intersegment Sales'
According to International Accounting Standards (IAS) 14, a segment is "a component of an entity that (a) provides a single product or service or a group of related products and services and (b) that is subject to risks and returns that are different from those of other business segments." Intersegment sales occur when one segment sources products or materials from another unit of the company instead of purchasing them from a third party. If such sales transactions of an entity represent 10% or more of total sales, IAS 14 requires a breakdown of segment sales. When segment A sells to segment B, segment A books those revenues. In a typical segment sales note, segment A total revenues, inclusive of revenues from segment B, are displayed on top, then intersegment sales (to B or other units of the company) are deducted to arrive at a net sales figure for the segment. However, some companies will disclose gross segment revenues and intersegment revenues without netting them out for the reader of the financial statements.

 

[Old Timer]

The whole notion is to provide a more clear picture of true revenues recieved from a seperate corporate entity. I think CVSH had like $30B or something in eliminations last year (you can check their financials on their website). This is >10% total revs so it’s reported per GAAP. Some analysts not privvy to the actual non-reported details use these figures to ballpark % of CVS pharmacy scripts that are caremark. For anyone to improve their knowledge of GAAP... via investopedia...


BREAKING DOWN 'Intersegment Sales'
According to International Accounting Standards (IAS) 14, a segment is "a component of an entity that (a) provides a single product or service or a group of related products and services and (b) that is subject to risks and returns that are different from those of other business segments." Intersegment sales occur when one segment sources products or materials from another unit of the company instead of purchasing them from a third party. If such sales transactions of an entity represent 10% or more of total sales, IAS 14 requires a breakdown of segment sales. When segment A sells to segment B, segment A books those revenues. In a typical segment sales note, segment A total revenues, inclusive of revenues from segment B, are displayed on top, then intersegment sales (to B or other units of the company) are deducted to arrive at a net sales figure for the segment. However, some companies will disclose gross segment revenues and intersegment revenues without netting them out for the reader of the financial statements.

It's accounting nonsense. Sales are sales. As long as they expense the sales from the PBM side and book the revenue to the store side it all comes out in the wash....... You can't say scripts filled at CVS stores billed to Caremark don't count as revenue....

 

[PharFromNormal]

It's accounting nonsense. Sales are sales. As long as they expense the sales from the PBM side and book the revenue to the store side it all comes out in the wash....... You can't say scripts filled at CVS stores billed to Caremark don't count as revenue....

It’s one corporation. If you count sales within an organization multiple times when evaluating a corporation that’s the accounting nonsense. You can literally create endless fake revenue on paper. I’m not sure what’s not making sense about this.... they could create a company of CVS store employees inc where CVS stores pay CVS store employees inc. store employees inc books revenue from CVS stores inc and CVS stores books cost of paying employees. Creating fake revenue out of employee cost...If you want to compare CVS stores to amazon count it. If you want to compare CVS health don’t double count.

 

[PharFromNormal]

It's accounting nonsense. Sales are sales. As long as they expense the sales from the PBM side and book the revenue to the store side it all comes out in the wash....... You can't say scripts filled at CVS stores billed to Caremark don't count as revenue....

Just so I understand your perspective... how would CVS store scripts billed to caremark for CVS health employees utilizing their employee benefits be counted? As revenue or cost? Let’s assume $0 copay...