Amazon Shocks by Retracting Decision to Sell Pharmaceuticals
Amazon has revealed that it’s pulling out of its move to enter the pharmaceutical distribution market.
The news has left many shocked especially since it was only last year that the company revealed its plan, following the acceptance of various pharmacy licenses in a small number of U.S. states, writes Pharma File.
This initial announcement was feared by a number of big drugstores who were well aware of the impact an Amazon entry would have on their marketplace. It even left some rushing to consolidate the marketplace.
CVS, for example, decided to seal a $69 billion deal for Aetna, one of the largest providers of health insurance in the U.S., while Walmart has been apparently eyeing Humana, another insurer, to keep pace with its rival.
But, it would seem such moves were far too premature, with the business section of Amazon deemed the supply chain too complex to enter. It would be too difficult to penetrate, due to the long-standing relationships that exist between hospitals and providers, as well as the basic challenges facing anyone wishing to transport pharmaceuticals.
In particular, the cold chain aspect of the pharma supply chain is difficult, largely due to stringent regulation and the need for specialised means of transporting such goods, biologics or vaccines, for instance.
However, for those already involved, it is a growing marketplace. It is currently worth around $13 billion and is set to grow by 10.2% CAGR through to 2022. To enter the cold chain market would have meant some serious upfront expenses for Amazon in order to cater for this side of the supply chain.
Amazon Business has been focused on selling medical supplies that cover hospital’s basic needs, such as gloves and stethoscopes. Even in this area though, hospitals have been reluctant to use Amazon’s services, due to the limited array of medical devices offered – only Class I and II, therefore avoiding the higher risk Class III devices, which includes breast implants and pacemakers.
But, the healthcare area is still very much in Jeff Bezos’ sights, and this pullback does not mean that Amazon may not enter the space in the future.