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Amazon is weighing a push into physical pharmacies to grab a bigger slice of the $370 billion prescription market

  • Amazon is considering the launch of physical pharmacies, Insider has learned.
  • Amazon Pharmacy’s leaders have discussed using Whole Foods locations and creating standalone sites.
  • There is not a concrete plan to do so, three people familiar with the matter said.
  • See more stories on Insider’s business page.

Amazon is considering options for creating a physical retail pharmacy presence in the US, three people familiar with the matter told Insider. It’s part of a plan to win over a larger slice of the prescription drug industry.

There is not a concrete plan to do so, and the talks are mostly exploratory, the people said. They were not authorized to speak to the press. Any meaningful rollout of stores could take more than a year, one of them said.

Amazon Pharmacy, which launched in November 2020, lets people buy their prescription medications online with two-day shipping if they have a Prime membership. 

The venture has discussed setting up standalone stores in a handful of locations including Boston and Phoenix, one of the people, who had direct knowledge of the matter, said. There have also been discussions about putting the pharmacies inside of Amazon-owned Whole Foods locations, the three people said. Local stores could help Amazon reach more kinds of patients with more urgent needs because of the amount of time it takes to ship medications.

Amazon could test different pharmacy strategies

A spokesperson for Amazon said that the company doesn’t comment on rumor or speculation. 

“Amazon Pharmacy is focused on making at-home delivery pharmacy easier and more convenient for customers,” the spokesperson said. “Customers can complete an entire pharmacy transaction on their desktop or mobile device through the Amazon App and have medications arrive at their door, with free two-day delivery for Prime members.”

It’s likely we’ll see Amazon test different strategies for its in-person pharmacies, two of the people said.

Amazon bought Whole Foods in 2017, and the stocks of pharmacy companies tanked the day the deal was announced on suspicion that Amazon could enter the space. But so far, Amazon hasn’t yet tapped the more than 350 Whole Foods locations, which don’t have pharmacies, to build out its new prescription business. 

Building out pharmacies within Whole Foods would be a big undertaking, because each store would require new equipment and the company would need to hire pharmacists. With just 350 shops, Whole Foods doesn’t offer the same reach as pharmacy giants CVS and Walgreens, making the returns uncertain.

The biggest pharmacies have storefronts

The biggest US pharmacies by prescriptions, such as CVS Health, Walgreens, and Walmart, have thousands of stores apiece.

Industry observers have long speculated that Amazon’s pharmacy business would build a retail pharmacy footprint, too, especially following the $1.6 trillion giant’s investments in grocery services and convenience stores

Amazon Pharmacy got its start when Amazon acquired online pharmacy PillPack in 2018. PillPack was designed for people with multiple daily prescriptions, like customers with chronic conditions whose medications are predictable and can be scheduled in advance.

Setting up physical stores in addition to the online business could allow Amazon to grab a bigger slice of the $370 billion US prescription drug market, because many people need medications more urgently than within 48 hours. Those diagnosed with an infection, for example, may be more likely to send their prescription to a nearby pharmacy so that they can pick it up immediately. 

Amazon has stayed relatively quiet about its pharmacy pursuits for years following its PillPack acquisition, but it’s recently been rolling out more features. Earlier this month, it launched a tool that allows shoppers to compare drug prices across pharmacies.

But many of its benefits are dependent on other established healthcare players. The savings that Amazon Pharmacy offers Prime members, for example, is administered through pharmacy benefit manager Express Script’s Inside Rx.

Under that benefit, members can save up to 80% on generic drugs and 40% on brand-name drugs when paying for medications without insurance via Amazon — or at more than 50,000 other pharmacies, many of which are owned by Amazon’s retail rivals.

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