It’s no real secret that Amazon.com, Inc. (NASDAQ:AMZN) has been disruptive to a variety of industries. It’s been a growing thorn in the side of Wal-Mart Stores Inc (NYSE:WMT) for a couple of decades now, but even specialty retailers like office supply chain Staples, Inc. (NASDAQ:SPLS) have felt the adverse impact of what happens when Amazon decides to focus in on a specific sliver of a market.
There’s one arena owners of AMZN stock haven’t seen the company tiptoe into yet — pharmaceuticals. That is, they haven’t seen it until now.
It was reported earlier this week that the e-commerce giant is looking to hire someone qualified to head up Amazon’s entry into the drug dispensing business where it could compete head-on with pharmacies like Walgreens Boots Alliance Inc (NASDAQ:WBA), and make waves for pharmacy benefits managers like Express Scripts Holding Company (NASDAQ:ESRX).
A Worthy Target Market
It’s not the first time the prospect of Amazon’s entry into pharma has been raised, but it’s the most serious the talks have ever been.
The prod for the decision isn’t a difficult one to believe: Costs of healthcare, drugs in particular, have skyrocketed in recent years; and if anything, drug pricing and insurance coverage plans have become even less transparent.
Amazon arguably feels it can do for drugs what it’s done for so many other categories of consumer products by cutting out the bulk of the markup that would normally go to the retailer. That’s because Amazon is usually willing to accept lower margins, since its sheer size/scale allow it to operate more cost-efficiently.
The part AMZN stock holders like: United States consumers spend on the order of $300 billion per year on prescription drugs. If Amazon plays its cards right, GoodRx founder Stephen Buck believes Amazon could capture between $25 billion and $50 billion worth of that business per year.
The Time Is Right
It won’t be easy getting into the business. Aside from being a whole new arm, pharmaceuticals are highly regulated. Building a digital prescription framework is not only a logistical nightmare, but physicians may be leery of using such a platform.
In fact, Amazon has tried it before.