Amazon is making bold strides in the healthcare market, but physical retailers like CVS and Walgreens maintain dominance — for now.
With four billion prescriptions ordered in the U.S. each year, pharmacies play a major role in the healthcare market and economy at large. Most of that massive market share is held by chain pharmacy giants like CVS and Walgreens — but e-commerce giant Amazon is making a play for its piece of the pie and sending traditional pharmacies scrambling to maintain their lead.
In the latest of several healthcare initiatives, Amazon acquired PillPack, an online pharmacy that packages and delivers medications. These recent actions resulted in plummeting stock prices for CVS, Walgreens, and Rite Aid, who saw a combined value loss of $11 billion. But it’s far from time to ring the bell on this pharmacy showdown, as the three traditional pharmacies roll out new patient-centric measures and Amazon falters in getting its own pharmacy off the ground.
While Walgreens and CVS are far from offering Amazon’s diversified, one-stop shop services or free two-day delivery, both pharmacy giants have taken recent steps to defend against the encroaching threat from Amazon and PillPack. That being said, the pharmacies do not currently seem equally-equipped to take on Amazon.
CVS’s acquisition of the health insurance giant Aetna places it at a distinct advantage. This partnership could help CVS provide competitive and seamless reimbursement for prescriptions. As the merger progresses, CVS also has the potential to increase its service offerings by harnessing Aetna’s patient data.
In addition, CVS has rolled out a new medication delivery service that rivals Amazon’s. Customers located in CVS markets will be able to receive their prescriptions as well as over-the-counter drugs in as little as one or two days. Though the delivery will come with a fee, it provides a convenient service that is traditionally associated with its new e-commerce competitor.
Walgreens, on the other hand, recently debuted a digital marketplace called “Find Care Now,” which shows great promise as a cost comparison tool. It lists prices for healthcare services ranging from a local clinic visit to a podiatrist consultation. Unfortunately for Walgreens, studies have shown that patients tend not to shop for healthcare even when easy-to-use shopping tools are made available to them, so this digital marketplace is unlikely to give the pharmacy a huge leg up over its competitors.
Walgreens’ and CVS’s updated services seem promising thus far, but their greatest advantage over Amazon may be their legacy reputations. Both CVS and Walgreens are emphasizing their ability to provide a personalized service to patients, as they operate a combined 18,000 brick-and-mortar locations nationwide. Amazon rivals neither the physical presence nor the established relationships with patients of CVS and Walgreens.
“With a physical presence in almost every community across the country, we have the unique ability to meet patients where they are and provide the care and services they need,” explains CVS Health CEO Larry Merlo.
Currently, Amazon’s major selling points are its convenient delivery and low price point. Amazon-brand Basic Care products already tend to be less expensive than over-the-counter medicines at CVS and Walgreens. In fact, a comparison showed that CVS products were 20% more expensive than Amazon’s, while Walgreen’s were 22% more expensive. Yet it lacks a relationship with a major health insurer — and with patients.
If Amazon can establish the infrastructure and partnerships in the medical space that CVS and Walgreens have had in place for decades, it may be able to make a huge impact in the healthcare industry. Until then, physical pharmacies will remain dominant. The question is: once Amazon has the right infrastructure in place, will patients choose value over relationships? The answer remains to be seen.