4 Reasons Why Amazon’s Foray into Pharma Might be Short Lived

on October 19 | in Pharmaceuticals | by | with No Comments

Last fall, reports were abuzz with Amazon’s plan to start entering the pharma industry. Amazon relied on its ability to connect the consumer with the seller to work in the same way for the pharma industry. They were going to act as the middlemen to supply necessary medication to hospitals and more. The report also stated that Amazon had acquired pharmacy licenses on a wholesale basis for different states in a bid to enter the pharma industry.

On the other hand, experts are suggesting that acquiring a few licenses is not going to make much of a difference for Amazon. In fact, based on the current conditions of the pharma industry, it seems that Amazon’s foothold in the pharma industry is still dubious at best. This is largely because of the following reasons:

1.   It’s Happened Before

Surprisingly, this isn’t the first time that Amazon has tried to enter the pharma industry. In 1999, Amazon invested heavily in the Drugstore.com that not only made waves but was hailed as “a goldmine” and experts wrote glowing thought pieces on its predicted future success and how it was taking the pharma industry online. By 2016 though, Drugstore.com had to be shut down and the pharma industry remains resiliently unchanged. Even when it was functioning, Drugstore.com struggled and never reported a profit.

2.   A Little Too Expensive to Enter

The pharma industry is notoriously expensive to enter and experts say that the barriers that businesses face to enter might be too high even for a billion dollar business like Amazon. While it is possible that Amazon might succeed in establishing a foothold in the industry, the odds against them are rather high. Even then, for the first few years, Amazon will have to spend more money and with little chances of seeing big returns. The costs associated will be difficult to shoulder.

3.   Restrictions on Medications

While Amazon aims at revolutionizing online pharmacies, the main problem lies in the fact that certain medications and drugs cannot be offered as freely as others. Opioids and narcotics cannot be co-mingled with other merchandise for general purchase. There is also the question of state regulations regarding the sale and purchase and shipment of drugs and medications. Without careful monitoring, it is very easy for the system to be abused. With opioid addiction and deaths relating to opioid addiction rising, increasing access to these drugs is not the best option.

4.   A Complex Logistical Infrastructure

Transport and shipping of medication are not as easy because many medications are temperature sensitive. This requires cold storage options, key connections with suppliers and no room for error otherwise the shipment is wasted. There is also the factor that many purchasers of medications work with businesses that they have a history with. Years of good faith cannot be replaced just because Amazon offers ease of access. Amazon will have to allow their buyers to build trust in a twofold manner; first with them and then the suppliers. This process can be slow and convoluted and doesn’t seem promising.

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