Source of Concern
In his blog, “Why Pharma Companies Should Be Scared,” Darshan Kulkarni, principal attorney at the Kulkarni Law Firm, shares his thoughts on how Amazon might be making “dramatic changes that may impact pharmaceutical companies.”
First, Kulkarni says that Amazon could “flatten the playing field for retail pharmacy” by building relationships with pharmaceutical companies that would eliminate the current distribution channels or else buy companies that would enable it to both produce and distribute drugs. If Amazon can bypass the current distribution pathway, it might also be able to avoid the payor pathway. If Amazon can procure discounts with bulk medication purchases, it might circumvent the use of rebates and coupons if drugs are sold directly for cash more inexpensively than co-pays.
Amazon could do direct patient deliveries by eliminating pharmacies from the supply chain and providing “maximal price transparency.” While Amazon delivers mostly consumer goods, it will need to figure out how to handle special drugs such as biologics that have specific temperature considerations or controlled substances that have specific security considerations. change how they develop drugs. This consideration could change how pharmaceutical companies develop drugs.
Amazon would need to improve its ability to track the source of or authenticity of drug products, especially those purchased outside of the US. “Track and trace requirements” that are being proposed by the FDA will be important.
There are already over-the-counter drugs under Amazon’s personal brand. So they have already entered that market and if they start selling enough volume, they can drop the price. This is something to think about if you are a pharmaceutical company because Amazon could go from being a partner to a competitor.
While Amazon could get into the clinical research organization business, its business model focuses on distribution and is not likely to pursue the drug discovery business. However, its data collection capabilities could provide real-world evidence that would help CROs and pharma companies. It could assist with “a virtual clinical trial by delivering the drugs directly to the patient in a blind format,” Kulkarni asserts. Amazon could also use its data collection “to revolutionize how patients interact with drug information” as well as “to connect patients, pharmacists and doctors with pharmaceutical companies and each other.” The company’s recording keeping “could change how products are collected, created and curated.”
Amazon could just charge cash prices for drugs and not use rebates, providing a significant margin and going along with Trump administration policies. That could be bad news for “major prescription drug benefit managers (PBMs)” who “negotiate with pharmacies.”
Kulkarni believes that Amazon’s data analytics capabilities, marketing capabilities and AWS servers make it a credible player in the pharmaceutical market, but it has not yet made a big move. Only time will tell.