Amazon drug sales could 'blow the entire ecosystem apart'

By Health Care FOXBusiness

Amazon could be helpful to us: Merck CEO

Merck CEO Ken Frazier on areas for global growth, the Amazon effect, tax reform and where the opportunities are in drug research.

As the health care industry transitions to a more consumer-centric model, Amazon (AMZN) could represent a key piece of the puzzle that may eventually cut out the need for pharmacies altogether.

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On Tuesday, Merck (MRK) CEO Kenneth Frazier said that Amazon could be helpful for his company as it seeks to streamline drug distribution processes.

“We’re in the business of inventing new drugs, composition of matter. That’s the distribution side of the business. It could be helpful depending on how it rolls out. I think the critical issue here … [is] how do we get more efficiency in the distribution system, and how do we pass those efficiencies on to patients so that they can enjoy the savings and find medicines more affordable?” Frazier told FOX Business’ Maria Bartiromo on “Mornings with Maria.”

Amazon has already reportedly secured pharmacy-wholesaler licenses in more than a dozen states and even held preliminary discussions with drug makers. But what stands to make the e-commerce giant a true disruptor in the industry is its biggest strength – an extensive delivery network, Dedi Gilad, CEO of telehealth company Tyto Care, told FOX Business.

“Just as today’s connected health technologies are enabling consumers to monitor their health and even undergo full physical examinations from the comfort of home, Amazon’s move into health care has the potential to provide convenience and ease, changing healthcare for the better,” Gilad said.

Amazon has been extremely discreet about its intentions to get into health care. So far, in documents exchanged with regulators, it appears the company is not planning on storing or shipping drugs in the near-term. However, industry experts are not ruling out that possibility over the longer-term.

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Beyond ease of access, if Amazon does enter the pharmaceutical business, it has the capacity to revolutionize the entire system as we know it.

“One of the top three [considerations] when a human is choosing a health plan is all about whether my medicine is in the formulary,” Ingrid Lindberg, president of Kobie Marketing and former chief experience officer at Cigna (CI), told FOX Business. “If you take that connection out of the health care buying equation, you have just leveled the playing field for all health plans.”

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In December, retail pharmacy giant CVS Health (CVS) announced a $69 billion deal to acquire Aetna (AET), a move seen as potentially transformative for the consumer health care experience. But that deal would essentially be “moot” if Amazon entered the space, Lindberg pointed out, because the tech company would be able to provide even faster access to drugs. Further, Amazon would entirely eliminate the role of pharmacy benefit managers because its buying power would be so much more significant, Lindberg added, resulting in lower drug prices for consumers.

While drug makers, like Merck, might have little to gain from restructuring the system in this way, consumers stand to gain a lot.

“This is UberEATS for health care,” Lindberg said, imagining a future where a patient uses telehealth services to visit with a doctor and Alexa begins filling the prescription as it is given, using the lowest available price points. Amazon can execute deliveries in many cities within one to two hours, while consumers never leave the comfort of their homes.

“That could blow the entire ecosystem apart,” she added.

Amazon declined to comment on its health care plans when contacted by FOX Business.

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