Amazon more interested in shipping medical devices... for now

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Amazon is setting its sights on shipping medical devices rather than pharmaceuticals - at least for the time being. 

Earlier this year, rumours of the retail giant's imminent entry into the medicines market arose after news broke that it had obtained wholesale pharmacy licences in at least 12 US states.

Coupled with its purchase of grocery chain Whole Foods, the suggestion was that the firm could distribute prescription drugs via these newly purchased outlets.

In response to analysts, Amazon chief financial officer Brian Olsavsky remained tight-lipped about the company's intentions, saying he could not "confirm or deny any of the rumours related to pharmacy or anything else."

Despite not suggesting any concrete plans, Olsavsky's comments spooked shareholders in both Walgreens and CVS - two of the US' biggest pharmacy chains - leading to an almost 6% share price drop for both firms.

Since then, a few reports have suggested that the company is exploring the pharmacy business as well as speaking to healthcare regulators.

More light may have just been shed on the issue though. As reported by CNBC, the online shopping giant is delaying its anticipated entry into the pharmaceutical market over concerns related to the market's stringent regulations.

Instead, Amazon is looking to sell medical devices and supplies through its Indiana fulfilment centre for the time being, according to a Freedom of Information Act request by US investment firm Jefferies.

"Applicant (Amazon) will not store or ship drugs," the application states.

Of course, tackling the simpler aspects of the healthcare market first, like shipping medical equipment and devices, does not mean it will now eventually take on the pharmacy market.

One idea is that Amazon could use its licenses to act as a pharmacy benefits manager (PBM), negotiating price cuts with pharmaceutical companies and pharmacies to sell to US healthcare providers.

The move would prove lucrative for Amazon - the market is thought to be worth around $420 billion. Recent poor press surrounding PBMs and their role in drug price inflation could also open the door to cheaper drug pricing from Amazon.

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Marco Ricci

21 November, 2017