Amazon has been a disruptive force across multiple industries for several years. After expanding beyond its traditional categories of books and music, Amazon has of course expanded into categories ranging from entertainment, perishable food retailing, hard goods retailing, and most recently into healthcare.
Amazon’s “Haven” initiative formed a partnership with JP Morgan Chase, Berkshire Hathaway with the purpose of “changing the way people experience health care so that it is simpler, better, and lower cost” according to Dr. Atul Gawande, the CEO of this new joint venture.
Amazon has found success by disrupting existing channels using a similar formula: leverage existing Amazon platforms (distribution, web hosting, retail capabilities), a larger assortment, a lower cost-structure and prices, and then using these advantages to create a significant mass of customers (and revenues) in new industries.
Most recently, Amazon acquired PillPak, an online pharmacy. While the Pharmaceutical distribution process in the US and in other countries around the world is quite complex, this US acquisition means Amazon is poised to enter one of the largest global healthcare markets in the world: the United States.
Amazon will almost definitely leverage its existing platforms of online commerce, voice-activated ordering (Alexa), home delivery (PrimeNow, Whole Foods) in its push into Pharmacy distribution. Existing market players will of course resist these efforts, but Amazon has significant experience in disrupting industries ranging from entertainment to brick & mortar retail that saw Amazon only as it what it was, not as what it could be.
For example, it is conceivable that the near future could see Amazon focus first on cash only or HSA card prescription drug or medical device purchases through Alexa. One could simply ask Alexa what prescriptions are eligible for refill, and select the prescription one wishes to refill either by 2-day shipping, 1-day shipping, or PrimeNow same-day delivery. Patients would avoid the lines at the pharmacy, and traditional pharmacy channels could lose out on sales.
Amazon filed a patent in 2018 that takes this simple use-case a step further. It outlines a functionality whereby Alexa might notice that you are sick based on your voice, coughing or sniffling, and ask you proactively if it can take helpful steps to address the problem. In theory, this could include asking you if you need to refill a prescription, or if you have been taking your already-filled Amazon prescriptions.
While many of these digital use cases have yet to be tested, it is not unforeseeable that Amazon already has some of the necessary components in place to create disruption for Life Sciences Manufacturers, Distributors and traditional distribution channel players, as well as providers and payers.
Perhaps even more immediately, Amazon has been spearheading its “Amazon Business” B2B marketplace, and is looking to supply healthcare providers, research clinics, labs and other types of healthcare / life science entities among their broad swath of B2B targets. Similar to their consumer business, Amazon is looking to become a first-stop for B2B businesses of all kinds. This could be disruptive for Life Sciences supply businesses (ex: hospital consumable products, medical device manufacturers, etc).
Life Sciences manufacturers need to consider how they can not only adapt their channel strategy to this potential new entrant and distribution channel, but also provide value beyond just price to traditional channel partners.
- Can you proactively create use cases for Amazon that protect your brand equity, channel strategy and grow sales, drive compliance, and or interact directly with patients (compliance + brand preference)? Can you leverage some of these use cases with AND without Amazon to provide you with leverage?
- Can you build a platform of engagement for your own business that interacts with patients, doctors, pharmacies, etc so that you can collect insights, quickly capitalize on opportunities at scale, and help your customer interactions run as smoothly as Amazon?
Pharmaceutical and Medical Device distributors need to determine how they can provide value to their industry partners, beyond just transacting and shipping.
- Are you providing services (in addition to products) for patients and other stakeholders that differentiate you?
- Are you leveraging technology to create a platform to engage B2B and B2C that you can leverage to differentiate you vs. Amazon?
Amazon undoubtedly has a plan for Life Sciences broadly.
The question moving forward will be: do Life Sciences Manufacturers and Distributors have a plan for Amazon?