Amazon said to be eyeing pharmacy business
Alexa might want to be your drugstore, too: Amazon (AMZN) reportedly has obtained pharmacy licenses in a handful of states, hinting at possible plans to disrupt both the drugstore business and the larger healthcare industry.
According to the St. Louis Post-Dispatch, the e-commerce giant has received wholesale pharmacy licenses in at least 12 states, including Alabama, Arizona, Connecticut, Idaho, Louisiana, Michigan, Nevada, New Hampshire, New Jersey, North Dakota, Oregon, and Tennessee. Some states require the permits to sell "professional use only" medical devices to medical and dental practices such as procedure trays, sutures, and syringes.
Amazon's potential entry into the pharmaceutical business spurred drug store and pharmaceutical benefits manager CVS (CVS) to make a $66 billion offer for health insurer Aetna (AET), according to the Wall Street Journal, As the Journal noted, most prescriptions are filled in bricks-and-mortar pharmacies though patients with chronic conditions are encouraged by insurers to get their medications through mail-order dispensaries.
According to CNBC, Amazon expects to decide by Thanksgiving whether it will begin selling prescription drugs online. Morningstar analyst Vishnu Lekraj, however, is skeptical about reports linking Amazon to the business of selling medications.
"I don't believe that obtaining wholesale licenses in a handful of states really portends a major expansion that's imminent as far as Amazon moving into any part of the pharmaceutical space," said Lekraj, who follows the pharmacy benefits managers, said in an interview. "This is not a typical consumer industry."
Among the many challenges that Amazon would face in the pharmaceuticals market that it hasn't experienced in other businesses it has entered are the insurance companies, Leraj said.
A spokeswoman for Amazon declined to comment, saying the company doesn't address speculation.
Amazon, the largest online retailer, is on a tear after reporting a blowout quarter earlier this week. Its shares surged more than 13 percent today to an all-time high of nearly $1,100.95. The company's market capitalization rose $62 billion on Friday, roughly four times the size of the economy of Iceland.
Shares of Express Scripts (ESRX), a leading pharmacy benefits manager, rose more than 5 percent to $62.19 in trading Friday. Earlier this week, CEO Tim Wentworth told Wall Street analysts that he was "very confident we'll stand well against an entry in the [pharmacy benefits manager] space, be it Amazon or anybody." Along with rivals such as McKesson (MCK) and AmerisourceBergen (ABC), shares of Express Scripts fell after the Post-Dispatch article appeared.
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Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.
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