Pharmaceutical distribution vary from country to country, but all of them are subject factors that make genuine competition in the sale of prescription drugs a complex matter. The need to verify that the patient requesting a given medicine has obtained the corresponding prescription from a doctor, as well as other aspects related to how the medicine is acquired (totally or partially subsidized, by public or private bodies, etc.), along with other issues reflect a business fabric that can vary enormously from the large US drugstore chains to the traditional pharmacies in many European countries, owned by a qualified pharmacist, with their regulated margins, and which until a few years ago, sold only pharmaceutical or related products.
Recent moves by Amazon seem to presage disruption in the pharmaceutical sector. In June 2018, the e-commerce giant acquired PillPack for just under $1 billion, precipitating sharp falls in the share value of companies such as CVS, Walgreens, Boots or Rite Aid: PillPack, which also traded with Walmart and was simply a little-known startup as far as the general public was concerned, had obtained a license to sell prescription drugs in all US states, and furthermore, was a service designed from scratch to be digital, a situation very few of its competitors could contemplate.
To be fair, traditional drug distribution could hardly be described as primitive: they’re not particularly old-fashioned, generally have digitized logistics, and except for the parts of their business related to dealing with the administration, which do not affect users so much as pharmacies’ cash management, they have evolved significantly over the years. Nevertheless, they are subject to restrictions that determine, for example, the number of pharmacies that can be found in a given city or neighborhood, their opening hours, and above all, they sell a category of products that, generally speaking, we are not particularly keen to buy. Most of the time, we go to a pharmacy to obtain something that could just as easily be delivered to our homes.
Sure, pharmacies may not be living in prehistoric times, but one has to wonder how they can compete against a system that, for example, can pack the medicines we need on a daily basis, with the corresponding date and time printed on the bag, as well as incorporating alerts and even coordinate with doctors to specify treatments.
Digitizing the system so as to provide an internet-based service is not a particularly complex process: it is enough to verify the prescription and process it properly, one that is not simple or speedy, but manageable, and even more so by someone with the appropriate means and experience to do so. But improving the service provided by profiling the customer, handling their inventory, grouping treatments to improve adherence and reduce confusion, or managing margins and, therefore, prices, can offer many advantages to a giant like Amazon with more experience than anyone else in the e-commerce environment, as well as reducing friction in a process that most users tend to find not particularly convenient. A visit to a pharmacy may be part of our daily routine, but there is little doubt that most of could quickly adapt to placing our order via a screen.
That little-known startup Amazon acquired in June 2018 is now fully integrated into the e-commerce giant, and is already operating in the United States. The company introduced the name Amazon Pharmacy at the end of 2019, and has recently registered it as a trademark in Australia, Brazil, Canada, China, Egypt, India, Israel, Japan, Mexico, Singapore, Taiwan, Turkey, the United Arab Emirates and the European Union.
Registering this trademark indicates Amazon’s intention to distribute prescription drugs, and will already be preparing the human resources and administrative procedures required. An Amazon spokesperson has said that, “we are always considering ways to delight customers in all the markets we serve”, while medication accounts, in many cases, for a significant percentage of household consumption, is also associated with other items, among them OTC drugs to parapharmaceuticals, cosmetics or wellness-related products, in which the company already has a significant position.
The impending disruption of the pharmaceutical sector reflects taking place in retail and high street trade in general, and although it has some specific characteristics, these will not be insurmountable for an outfit with the ability, experience and customer confidence of Amazon.
As a consumer, if you’ve never thought of taking a photograph of your prescription, entering their code into your computer, receiving your medication direct to your front door, all through a 24-hour online customer service, then you should try. And if you’re in the pharmaceutical sector, start thinking about how the widespread adoption of such a system by your customers will work when it is launched, and what percentage of your current sales you will lose as a result. I’m afraid it’s not going to be insignificant.
About the Author
This article was written by Enrique Dans, professor of Innovation at IE Business School and blogger at enriquedans.com.