Amazon ( AMZN ) took another step into the healthcare space, announcing a new $5 monthly subscription for Prime members for generic drugs on Tuesday.
The announcement is Amazon’s latest foray into healthcare after the company acquired PillPack in 2018, following its acquisition of One Medical ( ONEM ) last year. It was also part of the failed Haven venture that involved JPMorgan ( JPM ) and Berkshire Hathaway ( BRK-A , BRK-B ) trying to manage health care costs for large employers. Previously, Amazon offered six months of certain generic drugs for $6.
Analysts at Evercore ISI said in a note on Tuesday that the announcement was a “gradual experiment with pharma” for Amazon.
Generic prescription discounts are not a new concept and have become an increasingly competitive space. GoodRx (GDRX) has been on the scene 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 boast low generic drug costs.
Amazon takes it one step further — allowing multiple recipes to fall into that $5 per month payment — but only with a Prime membership.
That’s why Nephron analyst Eric Purcher noted, “While it is possible that the $5 price would offer savings to uninsured and underinsured patients who take multiple (generic) prescriptions, we do not believe it is significantly lower than what is offered from community and mail order pharmacies, especially when considering the cost of a Prime membership.”
In a statement Tuesday, Amazon Pharmacy Chief Medical Officer Dr. Vin Gupta noted an oft-cited statistic that inspired the new strategy, saying, “New drugs don’t get filled, refills don’t get taken.”
“Amazon Pharmacy addresses these challenges by making medicines more accessible, affordable and convenient. RxPass helps patients manage common health conditions — high blood pressure, anxiety or acid reflux, for example — by providing reliable access to commonly prescribed medications, delivered with the ease and support customers expect from Amazon,” added Gupta.
But there are a few exceptions. First, it does not apply to Medicare and Medicaid members. Second, it does not include insulin, a major target of the US government’s Inflation Reduction Act. Third, it’s a small pool of available drugs — roughly 50 different ones on the available list that treat 80 conditions, according to Amazon.
“Overall, we continue to see Amazon as a relatively small player in pharma in the short to medium term as innovation is much more difficult for branded drugs,” Evercore analysts said.
Nephron’s Percher similarly echoed that the move from Amazon shouldn’t affect CVS ( CVS ) or Walgreens ( WBA ), as they are also big players in home delivery as a result of the pandemic.
But Percher added, “It will be interesting to see if CVS and Walgreens, as well as Walmart and Kroger, adjust their low-cost generic offerings in response to RxPass.”
Megan Fitzgerald, an investor and professor of health policy at Columbia University, said Amazon’s relationship in the new program with complementary health services will be the key to watch.
“No surprise. Low-cost generics are now the price of entry for any pharmaceutical player entering the space. Breadth of formulary coverage, customer service and ancillary services (telehealth) will be important to differentiation and ultimately to gaining market share,” Fitzgerald said.
Follow Anjalee on Twitter @AnjKhem
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