Is Amazon Your Next Pharmacy? (3 part series)

Presented by the Gavel & Pestle Podcast with Darshan Kulkarni, Pharm.D, MS, Esq.
Show Notes

Part I: Learn the lingo most often used by professionals in the pharmacy world.

  • Players in the Pharmacy World:
    • Drug pipelines: Where do drugs come from? Group purchasing organizations
      (GPOs) purchase drugs in bulk and distribute to smaller or retail pharmacies.
      Who negotiates drug prices? Insurance companies are helpful when it comes
      to health coverage but they do not deal directly with pharmacies. Pharmacy
      benefit management (PBM) systems are skilled in negotiations between
      pharmacies and drug companies to ensure that a pharmacy is receiving the best
      price for a medication.
    • Pharmacy distributors vs. wholesale pharmacies: Pharmacy distributors and
      wholesale pharmacies are not synonymous. Distributors are responsible for the
      delivery of the medication between locations. Wholesale pharmacies purchase
      the medication and its title. Because the wholesale pharmacy has the title to the
      product, it accepts responsibility when things go wrong.
  • Pharmacy lingo
    • B2C pharmacies include both open and closed door local pharmacies. On a larger scale, big name insurance companies that have a say in how medication is distributed can also include B2C type pharmacies.
    • B2B organizations account for the majority of medication distributors and pharmacy management systems. B2B organizations include:
      • Central pharmacies including mail order pharmacies
      • GPO’s
      • Pharmacy benefit management systems such as the payor
      • Large medication distributors and pharmaceutical companies
Show Notes

Part II: Did you know that the type of pharmacy that dispenses your medication plays an important role in its availability, cost, and distribution? Here are some of the key differences between pharmacies:

 

  • 10 ways you pharmacy distributes drugs
    • Local Pharmacy: Local, neighborhood pharmacies are typically self owned, self sustaining pharmacies that do not have a responsibility to report to larger, head offices. Savings are indirectly passed to the customer but customers are not guaranteed that any medication will always be in stock. Nor can the pharmacy guarantee that they will even sell and dispense the medication prescribed for your specific needs.
    • Conglomerates: Many people look to fill brand name scripts at larger, conglomerate pharmacies such as CVS or RiteAid.  Some assert that there are differences in customer service as compared to a “neighborhood pharmacy”.
    • Franchise pharmacies: Franchise pharmacies offer the advantages of a centralized organization with marketing clout. Franchise fees, increased costs for the provider, and limited assistance are some of the disadvantages of franchise pharmacies.
    • Mail Order: Doctors may graciously provide a patient with a 90 day-supply of medication. However, large quantities of medication often mean that you will have to request your medication by postal delivery. Mail order pharmacies are known for charging reduced prices for medications. Mail order pharmacies can be independently owned or regulated through larger retail organizations. CVS Caremark is an example of a mail order pharmacy.
    • Specialty pharmacies: Conglomerate pharmacies that sell brand name, costly medications belong to a group of specialty pharmacies. It is not surprising that medication distributors find it difficult to enter this specific market.
    • Compounding pharmacies: Compounding pharmacies include type 503B pharmacies. Compounding pharmacies may synthesize special needs medications including intravenous, oral, and respiratory medications. The FDA highly regulates compounding pharmacies.
    • B2B pharmacies: B2B pharmacies supply doctor’s offices with intravenous medications.
    • B2B pharmacies include infusion centers.
    • B2B pharmacies include TPN pharmacies.
    • Finally, some manufactures such as Teva have entered the pharmacy business.

 

Show Notes

Part III: Amazon has expressed an interest in entering the pharmacy market only if it can be disruptive and can leverage its preexisting distribution infrastructure. If Amazon chooses to enter the drug dispensing business it may decide to:

 

  • Enable independently owned, conglomerate pharmacies to make centralized distributors obsolete. But the risk that some of these pharmacies could obtain drugs from the gray market could cause liability to Amazon.
  • Purchase a PBM or distributor, or act as one itself. While Amazon may have a competitive advantage, it would mostly be leveraging preexisting infrastructure.
  • Directly engage with third party manufacturers or follow a vertically integrated model so it can purchase drugs at low prices. This would allow Amazon to bypass distributors, PBMs and GPOs.  Additionally, it would give Amazon a treasure trove of data analytics that no single company actually has.
  • Sell directly and register with all states for licensure to dispense medications. Once licensure is obtained, Amazon could direct and manage sales to patients.

 

When that time comes, will Amazon fill your next script?