Amazon is making noise in pharma these days — here’s what it could all mean

If you had your druthers

Andrew Miller, Vice President of Operations at of Detroit-based PBM Meridian Rx, doesn’t think that necessarily has to take that much time for Amazon to enter the space.

“If I were Amazon… I’d be looking to buy a small mail order facility. Amazon’s strength is obviously the distribution so if you bought a small mail order licensed in 50 states it would be plug and play,” he said. “I think they’re looking for an adjudication system, and I think they’re looking for a network of pharmacies.”

In its report, Leerink seems to imply that Amazon is talking about partnering up with a PBM once it has a pharmacy business. That’s because the pharmaceutical business requires more than just your regular logistics company. You need to know how to navigate the healthcare system.

Leerink highlighted that in its report, addressing concerns that Amazon’s entrance into the field would hit distributors the hardest.

From the report [emphasis ours]:

Throughout the trip, investors were very persistent in asking about the impact of Amazon. CAH [Cardinal Health] highlighted that the biggest risk could be home delivery of medical products, but the issue here is that medical billing is very complicated.

If a member wants a product delivered to his or her home, and if they want that product covered by his or her insurance, then making sure that the claim is sent to the plan in a proper format is critical. It is unclear to us, as of now, how Amazon would manage through this challenge.

A PBM could help with that. And maybe not just partnering with one. If you’re Amazon not just buy a PBM and not have to deal with another party at all? If there’s anything PBMs get knocked for, it’s their lack of transparency. Critics accuse PBMs of having their hand in every part of the distribution chain — of taking rebates from drug companies in exchange for a good spot on formularies, for example.

So why would a giant like Amazon want to bother with all that?

Rumors and speculation

Miller told Business Insider that about 3 weeks ago he was contacted by a consultant doing research for an unnamed company with 270,000 employees in the retail space. The consultant said the company employed pharmacists.

“You get weird calls but usually you can figure out who they are pretty quick, this one I haven’t been able to figure out.”

This is what the consultant talked to Miller about:

• The retailer is looking into buying a small to mid-sized PBM. If the acquisition cost is under a certain price, the purchase wouldn’t need board approval.
• If it’s over a certain price, though, the purchase would need board approval.
• They also discussed the retailer partnering with a PBM.

“To my knowledge, they talked to seven to eight mid-level PBMs and the board was going to meet within the next month [as of 3 weeks ago] to decide its action,” Miller said.

We asked Amazon if they were the ones poking around asking these questions, or if it employs pharmacists, and the company said that it simply doesn’t respond to rumors and speculation. Amazon is also larger than the company described to Miller.

So maybe it’s not just Amazon poking around. There are a couple other possibilities. Whoever else it is, they want a piece.