Online Commerce Amazon now wants to be a pharmacy
Kathrin Werner, born in 1983, is a correspondent in New York. She already discovered her reporter enthusiasm as a student of the Hessian-Lower Saxon General and then studied law in Hamburg. She then started working for the business paper Financial Times Deutschland , which still existed at that time, first as a volunteer, later as an editor for renewable energies and maritime topics such as shipping companies and shipyards, and finally as a New York correspondent. She came to the Süddeutsche Zeitung in the early summer of 2013. In America, she handles all kinds of business topics: from 3-D printers and alligator leather to Chrysler, Amazon and Goldman Sachs.
TJ Parker comes from a family of pharmacists. Even as a teenager, he worked in his father’s pharmacy in New Hampshire – and noticed many things he did not like about the age-old industry. For example, that it is so difficult for many patients to actually take their prescribed pills regularly and to keep track of them. Parker is 32 years old, so for him a solution using technology, with the help of the internet, came close. He studied pharmacy and founded an online start-up, Pillpack. Now he sells it to Amazon.
Exact information, what plans Amazon with Pillpack, there is not yet. According to media reports, Amazon paid around one billion dollars for the 2013 founded company. Pillpack is so far only a niche provider with tens of thousands of customers compared to the millions who shop in pharmacies and drugstores with fixed stores. The start-up specializes in pre-sorted packs with a monthly supply of pills for the chronically ill. But through the young company Amazon gets important licenses for the drug trade – and access to customer data. Pillpack has a pharmacy license in all 50 states of the USA. Other corporations had to fight both for decades.
The old pharmacy and drugstore chains are still trying to avoid being too frightened, at least in public. “Yes, it’s a Memorandum of Understanding from Amazon, but the pharmacy world is much more complex than the delivery of certain pills or packages, and I firmly believe that the role of the inpatient pharmacy will remain very, very important in the future,” said Stefano Pessina , the boss of Walgreens Boots Alliance’s second largest pharmacy group, in a conference call. “I see no reason to worry.” After Amazon announced the acquisition, the stock prices of pharmacy and drugstore chains Rite Aid, Walgreens and CVS fell. Within hours, they together lost about $ 11 billion in market value. The Amazon paper, however, increased. The online retailer is now worth about $ 825 billion on the stock market.
In the US, $ 400 billion will be spent on drugs
For months now, the healthcare industry has trembled before Amazon’s entry into the business, with which it has largely undisturbed good profits generated over decades, unlike almost all other industries even almost undisturbed by the Internet. No country spends as much on health as the US. The cost per inhabitant is almost three times higher than the average of other industrialized countries – and according to a study by 2025, they are set to grow rapidly, even faster than the gross domestic product.
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The US drug trade alone is estimated to be more than $ 400 billion, accounting for nearly half of global sales. Amazon’s entry could depress prices – as is almost always the case when Amazon does something new. Seattle’s less than 24-year history has proven to be uncomfortable for competitors. After Amazon’s founding, initially as an online book mail order, the bookstore chain Borders slipped into bankruptcy. And since Amazon recently acquired the organic supermarket chain Whole Foods, traditional grocers are dreading and losing market value.
The entry into the health economy, however, should not be as easy as that in the book trade. Finally, US authorities pay much more attention to the protection of patient data and security in shipping, the industry is tightly regulated. In addition, the industry is conservative and works – at least outside the shipping sector, directly to consumers – with long-term contracts and trade relations forged over years. For hospitals, so major pharmaceutical customers, the price is less than the quality.
The Pillpack acquisition is just the first step
First, according to media reports, nothing should change in the name of Pillpack or in the licenses. Parker, the co-founder and boss, is to lead the company. Even the retailer Walmart, Amazon’s most powerful rival from the offline world, should have had interest in Pillpack, but could not prevail with the offer.
Before the acquisition of Pillpack, Amazon has already signaled to enter the industry. For example, Amazon agents have contacted one US hospital chain after another and offered it as a wholesaler. It was not about the drugs or other sensitive products, but first about syringes, latex gloves, smocks, patches and other medical supplies, which is not subject to any particularly strict regulation.
With the investment company Berkshire Hathaway of the investor Warren Buffett and the largest US bank JP Morgan Chase Amazon also wants to found a health insurance, initially only for its own employees. It aims to provide solutions to lower healthcare costs and make the interconnected system more transparent to hospitals, doctors, pharmacies, insurers and pharmaceutical companies – and cheaper. Stock prices of insurers promptly broke. The company has just announced that it has found a CEO: the famous doctor and scientist Atul Gawande. Not much is known about the plans of the health insurance. But together with the acquisition of Pillpack, she shows that Amazon is serious about entering the healthcare industry. “The health care system is complex and we are open-eyed to the challenge in terms of difficulty,” said Amazon boss Jeff Bezos. He had set out to “reduce the burden that the health industry for the economy means.”
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