thought experiment: amazon pharmacy?

Started by xiphoid2010
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xiphoid2010

xiphoid2010

Full Member
15+ Year Member
Was just reading this article on why amazon is increasing it's Prime membership price. Didn't know their profit margin was that razor thin. Adding drugs I would imagine would increase their profit margin. I personally would love to get my lipitor and baby formulas from one place with free 2 day shipping. So should they or should they not?

Not in the retail or mail order pharmacy sector, so members with more insight there please jump in.
 
I have no doubt that if Amazon wanted to they could run a mail order prescription business much better than express scripts or prescription solutions.
 
I imagine fake prescriptions would be an issue. People won't get so many fake tramadol Rx's from their PBM since the PBM knows everything about them. Me and a prepaid credit card and a new amazon account can do just about anything.
 
xiphoid2010 said:
Was just reading this article on why amazon is increasing it's Prime membership price. Didn't know their profit margin was that razor thin. Adding drugs I would imagine would increase their profit margin. I personally would love to get my lipitor and baby formulas from one place with free 2 day shipping. So should they or should they not?

Not in the retail or mail order pharmacy sector, so members with more insight there please jump in.
Click to expand...


The profit margins are already razor thin, prescription drugs would just be a huge money dump for them with little to no revenue since PBMs essentially dictate your reimbursement (which will be crap). On top of that, they'll have to pay pharmacists, an expensive resource. Someone has a question about a copay? Have you ever tried to actually talk to someone at a mail order pharmacy? Insanely difficult. People will get flustered and hate it and Amazon would have to issue gift cards for terrible customer service. For a company whose profit margins are already weak, this would just be an all around waste of time and resources.
 
Wheresmyaricept said:
The profit margins are already razor thin, prescription drugs would just be a huge money dump for them with little to no revenue since PBMs essentially dictate your reimbursement (which will be crap). On top of that, they'll have to pay pharmacists, an expensive resource. Someone has a question about a copay? Have you ever tried to actually talk to someone at a mail order pharmacy? Insanely difficult. People will get flustered and hate it and Amazon would have to issue gift cards for terrible customer service. For a company whose profit margins are already weak, this would just be an all around waste of time and resources.
Click to expand...

Who needs a PBM when everything is generic? Amazon could offer a barebones list of say 500 generic drugs and they will sell them to you at cost. You simply pay some upfront membership fee like Prime and you're in the program. As for customer service, Amazon is renowned for it's handling of customer issues.
 
Wheresmyaricept said:
The profit margins are already razor thin, prescription drugs would just be a huge money dump for them with little to no revenue since PBMs essentially dictate your reimbursement (which will be crap). On top of that, they'll have to pay pharmacists, an expensive resource. Someone has a question about a copay? Have you ever tried to actually talk to someone at a mail order pharmacy? Insanely difficult. People will get flustered and hate it and Amazon would have to issue gift cards for terrible customer service. For a company whose profit margins are already weak, this would just be an all around waste of time and resources.
Click to expand...

Didn't find any more detailed data on mail order pharmacy profitability. Was able to find some info on independent pharmacy: they average 22.5% Rx gross profit margin and net profit margin of 3%. In comparison, amazon is at 0.37%, granted the revenue is huge. The link also provides some interesting reading.

So how would amazon compare with running an independent, but as mail order only?
 
Gombrich12 said:
Who needs a PBM when everything is generic? Amazon could offer a barebones list of say 500 generic drugs and they will sell them to you at cost. You simply pay some upfront membership fee like Prime and you're in the program. As for customer service, Amazon is renowned for it's handling of customer issues.
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Many states do not permit pharmacies to have membership fees.
 
What does Amazon have to offer besides their shipping service?

Why hurt their business name by getting into the pharmacy business as we know a lot of people are going to be pissed off when they think they should get 30% off their copayment and get their medication the next day, just like their books.
 
I think they might be able to work it into their business model by selling exclusively to prescribers for in-office dispensing where allowed by law. PBMs are a huge hurdle otherwise.
 
Gombrich12 said:
Who needs a PBM when everything is generic? Amazon could offer a barebones list of say 500 generic drugs and they will sell them to you at cost. You simply pay some upfront membership fee like Prime and you're in the program. As for customer service, Amazon is renowned for it's handling of customer issues.
Click to expand...


Because multi pharmacy could kill people. The pharmacist at amazon sells you some cheap generic from doctor A. You go to doctor b, who prescribes a brand name that you choose to fill at your regular pharmacy, but interacts with the medication from doctor a. You forget to tell both doctor b and your regular pharmacy that you're taking a drug from doctor a. It gets dispensed to you and you have an adverse event. At least when you bill their insurance, they give you a DUR if there is an interaction, so you can at least ask Mrs. Smith if she started any new medications recently.
 
I happened upon a similar question recently that was asked & answered on Quora last year:


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"Will Amazon provide pharmacy services that take market share from Walgreens and CVS in the future?In other words, will Amazon be able to take market share from those companies that fill your prescriptions?"
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"It's unlikely, because it's outside Amazon's core strengths (warehouse automation and computing infrastructure), and there's little benefit (for consumers or Amazon) in having Amazon fill your Rx's.

A couple of things about filling a prescription that might help you understand the problem a little better:

Every prescription must be checked by a pharmacist before it is dispensed to a patient to ensure correctness. Therefore Amazon would have to hire a lot of pharmacists.
Copayments are, the same for at every pharmacy, assuming the pharmacy takes your insurance, and the cost of the medication is greater than your copayment in the traditional $10/$25/$50-type Rx copayment structure. The exception to this is when your pharmacy benefits manager (PBM) decides to offer you 3 months for the price of one (or two) if you do your Rx by mail. Sometimes retail chains will match this--but not often--and they're effectively eating the loss when they do.
Not all prescriptions are recurring. You're not going to get your antibiotic or painkiller filled at Amazon, because you need it now. These immediate prescriptions are 40-50% of pharmacy volume... this is enough volume to sustain neighborhood pharmacies well into the future.

The fact of the matter is, your PBM probably already offers the benefit of prescriptions by mail, and they do it cheaper than Amazon could.

Dispensing medications doesn't scale well, and the people who have licenses to do it are expensive. When a pharmacist does QA on a prescription they're checking a couple of things:

Does the drug match the prescription?
Are the instructions clear? Do they make sense?
Is the medication contraindicated with any of the other drugs the patient is taking?
Is the medication contraindicated with any of the medical conditions the person has?
Does it make sense from an age/weight/gender perspective?
Does the prescription itself make sense? (You'd be shocked at the percentage of prescriptions that have to be changed, which necessitates a call to the prescriber to correct whatever the problem is. IOW, it's very labor-intensive.)

Electronic prescribing is a panacea for exactly two things:
It solves the bad handwriting problem
Drugs match the dosages they come in (I.e. You won't see an Rx for Celebrex 15mg, because no such thing exists.)

It does not solve the:
Idiotic directions problem
The nonsensical quantity problem
The wrong drug selection problem
The wrong dosage problem
Any number of sanity problem permutations (which are alarmingly common)

Essentially, you have to solve the GIGO problem in a very, very reliable way in order to automate the practice of retail pharmacy. Most medication errors are prescriber errors, not dispensing errors. Error checking in health care is very hard to automate, because there are always exceptions to the rule, and you always need to be able to override normal parameters to account for it."
 
Amazon is running a deficit last quarter, losing 44 mil if I remember correctly... Thin margin. Check Alibaba - amazon, ebay, paypal combined, waaay better profit margin. Jack Ma is the man.

Prime at $99 for me is too high, I don't shop there often enough and remember they ship for free at $35 order anyway. Movies you get for free from the internet.. so no reason for me to sign up for it.
 
BMBiology said:
And Walmart is of course a huge company and already in the pharmacy business and no one has ever heard of their PBM. What does that tell you about the PBM business?
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How does that work exactly? I didn't think Walmart had a PBM. And don't most PBMs require you to use their own mail service anyway?
 
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