Investors wary after Amazon launches US pharmacy service

Posted on January 6, 2021

Posted on January 6, 2021

Investors wary after Amazon launches US pharmacy service

London – “I think the impact would be huge,” says Ahsan Bhatti, owner of online pharmacy Quick Meds.

He is concerned about the prospect of online giant Amazon moving into the pharmacy business in the United Kingdom.

“I’m worried. They’ll have a massive marketing budget, and they’ll definitely take a sizeable chunk out of every other pharmacy on the market. There will be closures as a direct result of it,” he says.

Bhatti will be closely watching developments in the United States where Amazon Pharmacy launched in November.

The service allows customers to make pharmacy transactions through Amazon and receive unlimited, free, two-day deliveries if they have a Prime membership.

Investors have taken note, with pharmacy chains like Walgreens and CVS seeing their share prices fall.

Although Amazon hasn’t yet announced plans for other countries, chemists in the UK are preparing themselves for a new competitor.

Bhatti is one of a growing number of pharmacists to sell products online, but Amazon’s entry would be likely to affect High Street pharmacies as well.

“What is lacking in every other pharmacy across the UK is the logistics and Amazon do that exceptionally well. It’s exactly what consumers want – having a prescription by 10 a.m. and dispensed by Amazon to them in the evening. The likes of Lloyds Pharmacy and Boots can’t do that, and independent pharmacies can only do this on a local level,” says Bhatti.

 

Bhatti opened Quick Meds in March, after putting in an application to the NHS 11 months earlier. It offers products online, as well as consultations over phone, WhatsApp, email, live chat and video, and even offers same day services locally.

However, for nationwide orders, the company relies on Royal Mail – and this is where Bhatti believes Amazon has the edge over online pharmacies as it has proven it can be relied upon for speedy deliveries.

“As great as Royal Mail are, occasionally things go wrong or missing and these delays might not be a big deal for online shopping but if we’re talking about a heart or diabetes medication, all of a sudden, it’s a problem,” he says.

It’s not just logistics that Amazon has on its side – the sheer size of the company enables it to have an advantage at the negotiating table.

“In the US, companies like CVS and Walmart negotiate drug prices all the time, and they have a fairly significant amount of market power. They’ve been able to create monopolies on certain drugs, making it more difficult for consumers to access drugs if you’re not shopping with them. If Amazon enters, it disrupts this because they have much more sizeable purchase power,” says Kate McCarthy, healthcare analyst at research company Gartner.

Jeff Bezos, Amazon’s chief executive, once said “your margin is my opportunity”, implying that Amazon delivered better prices by removing the costs added by the middlemen in the supply chain.

The pharmaceutical and healthcare sectors have complex and inefficient supply chains that he would look to cut out. (BBC)

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