On Tuesday, November 17th, Amazon launched their newest service for members: Amazon Pharmacy. This new digital drugstore is Amazon’s latest effort to obtain market share in the multi-billion-dollar health care industry. The US-based service will function similar to a traditional drugstore and will feature special benefits for Prime members. The pharmacy will accept most major insurance plans and will also have a savings benefit plan in place for customers without insurance. As Amazon has done in multiple other industries already, they are positioned to fully disrupt the health care industry in the following ways.
First, the customer service and efficiency of the pharmacy will be unmatched by its competitors. Since Amazon’s inception in 1994, Jeff Bezos has always designed Amazon’s services with the customer experience in mind. Due to Amazon’s acquisition of PillPack, they have the ability to streamline the supply chain and reinvent the current complex business model that is present in the industry. This will optimize the customer experience when ordering prescriptions and will make the entire process more efficient for both Amazon and the consumer.
Second, Amazon has the ability to heavily discount both generic and brand name drug prices. This is also a direct result of the PillPack acquisition, as middlemen that are present in the current industry supply chain will be cut out, allowing more profits to flow through to Amazon. It is estimated that Amazon will offer around an 80% discount for generic prescriptions and a 40% discount for brand names, heavy discounts that could spell trouble for other pharmacy’s that lack Amazon’s deep vertical integration.
Third, the company already has a network developed for prescription pickup and delivery that customers will undoubtedly seek to utilize. For one, Prime members will receive free two-day shipping on all prescriptions. Also, Amazon plans to integrate pharmacies into their Whole Foods locations, such as the ones available at grocery stores like Walmart or Target. This will make the process of obtaining a prescription much simpler than is currently available.
As Amazon proceeds to disrupt yet another industry, this further calls into question whether the company is becoming a monopoly. By definition, a monopoly is present when one company is able to dominate a specific sector or industry, let alone multiple industries. It can be a result of free-market capitalism and is used to describe an entity that has majority control of a particular market.
It can be argued that Amazon is using its market power to decrease competition and obtain control of different industries, thereby leaving the country with a less diverse, and less innovative, economy with fewer opportunities for new businesses. They currently control 75% of all online book sales and have displaced an open market of online shoppers with their privately controlled platform. Since half of all online searches begin with the word “Amazon,” this has forced other retailers to become third party sellers on their platform giving Amazon the ability to tax their revenues and control the terms by which they can operate. Now that it appears as though Amazon will utilize their online platform and audience to disrupt the pharmacy industry with streamlined services and heavily discounted prices, will this cause the company to become subject to further scrutiny as to whether or not they are forming a monopoly across several industries?
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