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Amazon Health Idea Proposal (AMZN, HSIC, PDCO, XRAY)

Amazon Health Idea Proposal (AMZN, HSIC, PDCO, XRAY)
 

How deeply can Amazon penetrate the healthcare industry? Where will it have the greatest success? Which barriers will be the most difficult to overcome?

Report Available: September 13, 2018

 

Blueshift’s initial and past research found AMZN disrupting the healthcare industry on several fronts. Amazon Business has been selling medical and dental supplies for the past three years and it continues to gain share, particularly with commodity products. AMZN, BRK and JPM have hired a healthcare heavyweight to lead their joint venture to reduce the cost of healthcare for their employees. Recently, AMZN purchased PillPack, an online pharmacy that provides the company with pharmacy licenses in 49 states. AMZN’s traction in its initial healthcare offering is impressive, but it has had challenges and failures. The healthcare industry is fraught with regulatory, technical, and numerous other complexities that may limit how deeply AMZN can penetrate the industry.

 

Observations

  1. A recent survey of 152 hospital executives found that 62% were supportive of AMZN’s disruption of the medical supply business. AMZN’s low-cost reputation and quick delivery turnaround are two reasons hospital executives are enthusiastic about AMZN’s involvement. AMZN eliminates the need for hospitals to go through a middle man distributor, allowing hospitals to buy supplies like bandages, syringes, and even hip replacements without traditional contract negotiations. Only 11% of executives surveyed said AMZN would not be successful, citing challenges from GPOs and the need for 100% accuracy with quality and delivery.
  2. The Boston-based AMZN, BRK and JPM healthcare venture recently hired Atul Gawande to lead their non-profit enterprise. The venture was created to focus on the use of technology solutions to provide its employees and their families “simplified, high-quality and transparent healthcare at a reasonable cost.”  Gawande has an impressive resume as a surgeon, Harvard public health and medical professor, writer, and healthcare thought leader. Details about the direction the enterprise will go are few, but the reduction of health care costs for the combined entity’s 1.2 million employees seems to be the primary goal. Speculation is that any successful program could be expanded outside the three sponsor companies.
  3. After suspending its plans to distribute prescription drugs in April, AMZN purchased PillPack on June 28. PillPack is a small ($100 million per year annual sales) online pharmacy with licenses to distribute medication in 49 states. The purchase is viewed as another disruptive move into the healthcare space that will pit AMZN against traditional drugstore chains, drug distributors, and pharmacy benefit managers (PBMs) for a bigger share of the $450 billion per year prescription drug market. With AMZN’s massive customer base and world class shipping logistics, it is expected that the company could expand its market share rapidly.
  4. Blueshift’s Feb.22 report revealed that AMZN would disrupt sales and distribution of prescription drugs and medical/dental supplies starting in as little as six months, particularly if it purchases a supply distributor, a mail order company, or PBM.

 

How deeply can AMZN penetrate the prescription drugs market? How much market share can AMZN capture in the medical and dental supply market? How will the AMZN, BRK and JPM healthcare venture impact the health insurance industry? What roadblocks and headwinds must AMZN overcome to gain share in each market?  What will happen to the PBM market segment? Which companies stand to be most disrupted by AMZN’s moves? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Drug and dental wholesalers and retailers, Pharmacy benefit managers (PBM), Group purchasing organizations (GPOs), Health insurance professionals, and Industry specialists.

 

Companies: AmerisourceBergen Corp. (ABC), CVS Health Corp. (CVS), Dentsply Sirona Inc. (XRAY), Express Scripts Holding Co. (ESRX), Henry Schein Inc. (HSIC), McKesson Corp. (MCK), Patterson Companies Inc. (PDCO), Rite Aid Corp. (RAD), Walgreens Boots Alliance Inc. (WBA), Aetna Inc. (AET), Anthem, Inc. (ANTM), Cigna Corporation (CI), UnitedHealth Group Incorporated (UNH), Humana Inc. (HUM)

 

Research Begins: August 27, 2018

 

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