Amazon Reportedly Pursuing Prescription Drug Sales, Legacy Retail Chains On Notice

Amazon has been an incredibly disruptive force as the world’s most dominant online retailer. Not only has Amazon crushed other online retailers that have attempted to compete with it, but brick and mortar retailers have also come under immense pressure (or folded completely) due to the company's ever-growing footprint.

Most recently, Amazon expanded its presence in the grocery market with the purchase of Whole Foods, and now the company is reportedly eyeing another adjacent leap into online prescription drug sales. According to a report from CNBC, Amazon will make a decision before Thanksgiving as to whether it will establish its first beachhead in the highly lucrative prescription drug market.

amazon jeff bezos
Amazon CEO Jeff Bezos (Image Source: Steve Jurvetson/Flickr)

How big is the market you ask? According to QuintilesIMS Holding, Americans spent $450 billion on prescription medication during 2016 (based on list prices), and that figure is expected to balloon to as high as $610 billion by the year 2021.

Amazon has reportedly been preparing for an expansion into prescription drugs with new hires over the past year. The company nabbed Mark Lyons from Premera Blue Cross, and has initiated a search for a general manager to spearhead this new business venture.

Amazon uses its immense purchasing power to put pricing pressure on suppliers, and often passes those savings onto consumers. With prescription drug prices often soaring into stratosphere, putting Americans at odds with their insurance companies to help cover costs, many are hoping that Amazon will be able to ignite a much-needed overhaul in the drug industry.

In fact, some of the biggest names in the drug retailer market are already feeling the heat of the rumors of Amazon's impending push into their bread and butter product cash cow. Shares of CVS Health Corp and Walgreens were both down nearly 5 percent on Friday, with Rite Aid down nearly 6 percent.

“We are convinced that AMZN will almost certainly enter the drug distribution value chain within 2 years, evolving into a more disruptive offering over time,” said Ana Gupte, an analyst for brokerage firm Leerink.