Amazon gains wholesale pharmacy licenses in multiple states | Hacker News Reader

Amazon gains wholesale pharmacy licenses in multiple states

stltoday.com

178 pointsrefurb96 comments

Apparently better for consumers in general now that there's more competition. One Industry I really really want them to enter is Consumer Airlines. Service in most airlines sucks, like big time. Can't wait for Amazon Airlines with Prime Video and Internet available for all.

But of course I know that's a distant dream unless the Prime Air works great.

Isn't Amazon notorious for bad customer service though? That would prevent them from disputing the industry.

I think they're a mixed bag, probably depending on some customer profitability / value score. I've heard other people complain about trouble when packages were stolen, but the few times it's happened to me, I've gotten replacements overnighted without even having to talk (chat or phone) to anyone.

Amazon is notorious for the opposite actually, at least in their retail business.

???

I've always found Amazon customer service to be amazing.

Seriously, I can't think of any other company where it's as easy to get a real person on the phone. Or a refund.

Amazon's customer service to consumers is exceptional, but the service they give to their merchants is horrible and extremely incompetent.

Yes. Business customer service is terrible.

> Can't wait for Amazon Airlines with Prime Video and Internet available for all.

It already exists on JetBlue. Prime video is for Prime members and Internet access for everyone.

https://www.jetblue.com/flying-on-jetblue/wifi/

Marketing copy:

> Earn 3 TrueBlue points per $1 spent shopping on Amazon.com. + Redeem those points for your next Award flight. + Enjoy fast, free Fly-Fi brought to you by Amazon. + Stream your favorite movies and TV shows on Amazon Video.

Airlines suck because it’s an undifferentiated service. Consumers aren’t willing to pay much extra for better service, and the lowest ticket price wins. It’s a race to the bottom on price, so features and comfort get cut in exchange for cost savings.

It’s basically a commodity industry with high capital requirements and high volatility in marginal costs. There’s a reason that most airlines globally are subsidized by governments (yes, including in the US).

Edit: and don’t forget that the airplanes themselves are heavily subsidized (Boeing and Airbus are two of the most heavily subsidized companies in the world). And even then, the industry can’t consistently make a profit over an extended period of high fuel prices.

I've never seen a serious attempt at service differentiation other than the ones that come at 5x cost.

The "quality" difference between most airlines is less than the random noise of getting staff on a good or bad day.

Premium economy - a better seat/legroom, but otherwise much the same service as economy (modulo sometimes free drinks or nicer food presentation). It's nowhere near universally available, but where it is, it's often available for around a 50% markup.

> [...] undifferentiated service [...] basically a commodity industry

That's pretty much Amazon's sweet spot.

I don't see them getting into passenger travel; the quickest way to trash your brand is to be a telecom or an airline. Low margin, undifferentiated services that consumers need, but require high capital investments... your investors will push you to grow per-seat revenue, and your customers will punish you for it (or vice versa).

No it sucks because gates are the finite resource in airlines, and deregulation combined with the government’s current view on anti-trust made it possible to monopolize the gates.

Man, I hear this argument all the time about airline service.

I've tried many airlines for work...service is fine. If your expecting 1950s level service you can pay 1950s pricing for business class.

I can't wait for Amazon Healthcare. I don't fly much, but I feel your woes. Last time I did I swore I wouldn't do it again unless it was the only way to get there.

I wanted Amazon to remake car rental after standing in line at a car rental place for 1.5 hours in for a Convertible I'd booked to go to Coachella, and then being told that they'd given it away to the people right in front of us because we were 'late' (WTF we were in line for 1.5 hours).

Fuck car rental companies.

This is going to be interesting. Drug wholesaling is a tough business with razor thin margins. Wholesalers don't make much off of branded drugs because the big drug companies have most of the negotiating power. It's not unusual for their cut to be in the tens of basis points.

They make the most money off of generic drugs and often use arbitrage as a revenue source when price increases happen. Price increases for generic drugs have been weak lately and it's hurting them.[1]

[1]http://www.drugchannels.net/2017/09/drug-wholesalers-struggl...

> razor thin margins

That's everything amazon does besides AWS

Yeah razor thin margins is barrier to entry that amazon sees as an opportunity not a threat.

Not exactly - Amazon has traditionally entered spaces with...not exactly razor thing margins, but margins with some wiggle room. Even their grocery play was on 'higher end' groceries and not a razor thin market like Acme/Shop Rite/Kroegers.

They then proceed to wrench out that wiggle room to drive out the established players and create an impossible barrier to entry.

You realize they do that on purpose right?

There's definitely savings that amazon could deliver.. take the (slim) wholesale profits + add the pharmacy profits.

They did something similar with books.. they cut out the wholesalers like ingram, and negotiated directly with the publishers.. allowing Amazon's retail price to be equal or less than Ingrams price that small book retailers pay... meaning even at 0% markup, amazon undercuts the small book retailers. (this was even before ebooks)

They could do the same here.. giving up the retail pharmacy profits.. undercutting every other pharmacy

Plus, at pharmacies efficiency could definitely be improved.. at the very least by reducing the number of $120k/yr pharmacists that are needed.

The 3 big wholesalers (Amerisource, McKesson, Cardinal) also own/operate PSAOs that provide various value add services to independent pharmacies.

I would say PBMs are far more creative with arbitraging and financial engineering, because they deal directly with plan payers, pharmacists, distributors, pharma, DME mfr, and patients.

They offer price guarantee/inflation protection, rebates to payers; they have very granular reimbursement agreement with pharmacies along with performance guarantees or penalties depending on how much generics they dispense, there is copay assistance program with pharma and patients.

PBM is a complex business, but there's no huge pool of money sloshing around. Money is in pharma and overall healthcare systems.

This is a long game for Amazon.

Amazon doesn't need to make money on it, though. They just want to dominate every aspect of everyone's retail existence. I'm sure they're perfectly happy to make zero profit for a long while and figure it out later, when they're the only ones left in business.

It’s amazing to watch all this happen on the consumer end but how many more industries can they really do this to? Is Bezos not essentially setting up his successor for failure by turning Amazon into a conglomerate with razor margins in so many areas?

This is the thing that I don't understand about the big companies like Google, Apple, Amazon. What's the endgame? Do you just keep going until you accidentally implode? It's not like there is a finish line they can cross to "win the game". It just goes on forever until something implodes.

It literally just (1) keeps printing money for investors and (2) keep some people employed. Ambitious people will take the mantle every 15-20 years and do more of 1 and 2 until they make a mistake.

The goal of a successful company is basically serving those two sets of people, Google may enter the retail market or real estate, or McDonalds will take over Cloud Computing -- they're all just trying to get a consistent return.

> keeps printing money for investors

Amazon doesn't give money to investors. Late investors give money to early investors. (Edit: Amazon has bought back some shares in the past, but that's far from even offsetting all the shares given away to employees...)

> Amazon doesn't give money to investors.

You mean "Amazon hasn't given (much) money to investors so far". It's an important distinction, whether you agree with their argument or not.

At some point, I guess, they have to collide with the US government. I don't mean in minor ways (like access to iPhone) but in a big existential way.

The finish line is full automation. There isn't some breakthrough that's going to happen overnight, you are watching it be created in slow motion by Amazon & Walmart. They are slowly working out every issue in their supply chain until its perfect. Once they finish society gets to move on to its next phase.

i think the theory is that Amazon's ultimate goal is to dominate all of commerce in its entirety, which is obviously impossible. However, if you consider that as the end goal, Amazon is really far from achieving it. And as long as Amazon can continue to build parts of this impossible machine in a way that does not deteriorate the system (i.e cause major losses that hold back the company), the value of the system will keep going up as the Amazon machine consumes more and more of the world's commercial activities. Since it's practically impossible to achieve that end goal, within any reasonable number of lifetimes, bezos's and amazon's wealth is unlikely to decline without government intervention.

Well why not? It's working out well for them so far.

Razer thin margins are still better than the zero margins that they would recieve by NOT entering the market.

If it is possible to make any money at all, then there is no reason not to take it.

Opportunity cost. They don't have an endless supply of cash (though it may seem like it).

They should be going into high margin markets, not just markets that have a minuscule profit margin.

AWS is their high margin product.

It seems to be their strategy is to enter markets that traditionally have razor margins, but the margin can be increased with careful application of technology or scale.

I think retail has always had the problem of margins. It's tough, but if you're big enough you probably end up with the resources to ride out difficult times. So being huge might be the right play here.

In a way this is supposed to be the end-goal of free markets right? No profit left for companies to have?

> a tough business with razor thin margins.

If an industry can be described in these terms, it's likely that Amazon is a potential entrant.

hey, if they could deliver as an add on item I would be happy. still with the the number of grocery and similar around me offering many common medicines for nothing I have done surprisingly well.

if it can be delivered, managed without quick degradation of quality, then it probably can be fit into Amazon's distribution system

Being able to order their medication and have it delivered the same day is going to be huge for lots of people. Sure, Amazon won't make much money but add everything else they sell and you have yet another reason why you can stay in the Amazon eco system for all your shopping needs.

If it takes Amazon to fix American healthcare, god bless them. What a total cluster fuck healthcare is, and if that’s what they want to fix, I’m very supportive. Putting $5k into their stock tomorrow

Serious question: How is a cut throat capitalist company gaining the ability to push pills going to fix American healthcare?

American healthcare is completely non-competitive. No pricing competition, high barriers of entry, and completely entrenched players. Any new players would be a win.

The main issue with American healthcare besides the price of drugs, insurance and care (which Amazon could help solve but is essentially a secondary conidition) is the philosophy around healthcare in general. It's all reactive. To solve healthcare America needs a better diet made up of actual food (not psuedo-food products), more exercise (cities designed for walking and biking not driving), doctors that aren't incentivized to sell drugs, no drug adverts etc. Basically to focus on prevention not reaction.

For starters, doctors are in a modern guild system. They artificially limit the number of medical schools, increasing the salaries of licensed doctors while limiting the supply. As society ages and needs more medical services, the poor are continually priced out as the supply of doctors is limited artificially.

Although extraordinary unpopular if you speak to doctors (as I have found), drastically increasing the number of doctors would do wonders. I’m sure there is a percentage (2%?) from poor countries that would pass in America as average quality.

Next, transparent pricing. Laser eye surgery has radically improved in quality while decreasing costs because insurance (typically) doesn’t cover it. People want it, but must pay out of pocket, so they shop around and elect to laser eye surgery on their own terms. The result is increased quality at lower prices. Not every medical procedure is this way (such as the emergency room), but perhaps if I needed a knee replaced, and until I did it I merely walked with a cane, I might shop around for the best price and value.

Until transparent pricing happens, and the supply of doctors meets demand, we will simply be passing laws to further warp free market incentives. My hope is that amazon increases the influence of free market mechanics into this horrible system.

Medicine cannot be managed by capitalism. Elements of the industry can, but the basic elements of care giving and treatment basically amount to “pay me or die”. The moral hazard in withholding care from some to be able to raise prices on others is too great.

Capitalism is great when the incentives line up without creating moral hazard; which they do in a lot of areas. But we as a society can have different priorities, and I do believe that there is a basic level of health care that should be free to all. If you want better care or if you disagree with what is provided, you’re free to shop outside the system.

Are no other countries capitalist systems? Say, Japan, who has fairly awesome compassionate healthcare I would think, they don't have a "socialist" medicare system do they? Britain is kind of hybrid I think? Australia as well maybe.

All guarantee basic care and allow you to buy up to better care[1]. Yeah, some things that are quality-of-life impacting but not life-threatening (like say, knee surgery) can have really long waits, but everyone gets seen.

You don’t have people choosing between paying rent or getting their insulin. Also, if the state had to bear the costs of health care, they might be more inclined to deal with the predatory practices of companies selling products that are dangerous long-term (cigarettes, aggressive marketing of junk food, etc)

[1]: Japan apparently has subsidized health care (consumer pays 30% unless they are poor); and the UK definitely provides government care through the NHS, though you can pay out of pocket and go to a private doctor if you have the means. Australia’s system is similar to the US, and they are facing similar problems as well.

But you could say the same about food. "Pay me, or starve". But in their greed, food makers have made food cheap.

That’s because food is easy to grow. Stone Age people seem to have figured it out. Medicine is much harder..

Plus not throwing up a hundred roadblocks to actually filling a specialty prescription. I've had to go for months before without a medication I have to take for a chronic illness twice a day, delayed endlessly by runarounds. I had to have a doctor send the prescription to three different places, it was shocking that the current system could have so much confusion.

If Bezos can somehow get politicians to give him the go ahead, he could probably cut consumer's costs in half and still make an absolutely obscene margin.

A growing number of Americans can't afford life-saving medications like insulin, inhalers for COPD, etc.

Considering the constant issues Amazon has had with counterfeit goods the last few years, I don't think I'd want to buy drugs from them.

Yes and wrongly shipped items. I get so many items that aren't correct.

Really? Anecdotally, I make lots and lots of Amazon orders, I get at least 1 or 2 a week, plus my prime subscriptions, and I have not had an issue getting the wrong item for several years. The only issue I've personally had, is the UPS driver dropped off a neighbor down the street's package at my house, which was a driver mistake.

Yes. In each case I was refunded the item's costs but still annoying. Their customer support has been okay.

They're coming for you too CVS and Walgreens.

CVS just announced a potential 60bn bid for Aetna.

Don’t underestimate them.

That’s why CVS is trying to buy Aetna. They’re going to be everything from your insurer, to your walk in clinic to your pharmacy. Maybe they’ll buy a hospital chain and go full stack.

CVS Health has PBM arm that serves other health plans, so it would be interesting to see how their health plan customers react. Health plan + PBM combo is nothing new, but health plan owning retail pharmacy chain would be interesting.

I don't think they will be buying hospital chain any time soon. Many are not for profit, and they are too fragmented to be integrated.

It's like the systemd of brick and mortar retail.

so Kaiser Permanente, basically

Kaiser still has the "everything in the same building" advantage. There are some down sides to Kaiser, but seeing my doctor, getting immunizations, having blood drawn for labs, having prescriptions filled and being out the door 45 minutes after I arrived isn't one of them. It's damn convenient.

Does this imply that Amazon will be in the place to negotiate drug prices? Trying to understand what could change given how a lot of PBMs appear to be wed to insurance groups (and now CVS looking to buy Aetna). What would be the next step, buy an insurance company? Or is it a matter of exposing the true cost of drug prices and drive the market costs down?

I don't think they would be in a position to negotiate prices anymore than CVS/Walgreens are. Their upside would mostly be changing the delivery method.

> Does this imply that Amazon will be in the place to negotiate drug prices?

Very much so. Amazon is clearly playing the monopsony card here, and has an opportunity to drive prices down.

Up too of course but Bezos has not shown any predilection for that to date.

Yep, a pharmacy coming to a Whole Foods near you. Circle of life.

Amazon Basics generic drugs? That could be very interesting.

Not really. FDA approval is already the Amazon Basics of generic drugs. If it says Acetaminophen 500mg, that's what you're getting, nothing more, nothing less, within a very narrow tolerance, entirely regardless of brand.

Not so with batteries or HDMI cables, and thus brands add meaningful value in that space.

Cvs big fear is drone delivery.

Amazon will solve last mile.

Why do they need drones for last mile, they can just use their own existing delivery infrastructure. Drones might be cheaper/better/faster in the long run, but, they aren't required for this to work.

My comment was totally anecdotal from a big data insider who said cvs is already extremely concerned drones remove store visits..

The "technology" required is the same as the postal service have provided for centuries (think pizza delivery for more urgent situations). Sounds like that insider is spending too much time on pop business sci-fi and too little time understanding basic facts about logistics (and, very likely, regulatory restrictions).

Drones would be killer for pharmacies. Low weight and small packages

Hey whatever it takes to bring down the awfully (and artificially) inflated prices of pharmaceuticals in this country (USA), the better I'll feel. If it takes Amazon getting in on the act - assuming pricing gets better - I'm in favor of it.

Walmart has a large pharmacy business. They attempted to enter the market and bring prices down (they succeeded in a small way, on a selection of common generic prescriptions). I'm not sure what Amazon can accomplish beyond what Walmart was able to with thousands of pharmacy locations. Hoping Bezos & Co. shake it up though, maybe they'll figure out something new.

Maybe to compete against Express Scripts and drugs stores, to a degree, but a by-mail pharmacy has a very steep hill to climb in terms of in-person/telepresence pharmacist expertise.

Express Scripts is primarily a PBM. It's not the same business

They did $51 billion in network revenue and $43 billion in home delivery pharmacy revenue in 2016, and their revenue mix has been trending more toward the pharmacy side over the last few years.

https://www.sec.gov/Archives/edgar/data/1532063/000153206317...

My parent's insurance has Express as the preferred provider, because it's cheaper all around. Also it's scheduled. Amazon already does this with supplements, making the jump to prescriptions won't be a problem.

Luckily for CVS and Walgreens, the barrier to entry to enter this market should be fairly low if you're already a pharmacy; unlike many of Amazon's other entries that have high costs.

Express Scripts own Accredo, one of the largest specialty pharmacies in the US!

I hope so. Dear god their service is atrocious. First, they wanted me to fill out some 1980s style book order form to get my prescription filled.

Then, for a year, they filled my 1-per-day, 90-pill, 3-month prescription..... every..... 2.... months. Unfortunately it was nothing of any resale or entertainment value.

I called them and waited on hold and someone promised they found and fixed the issue. It was not fixed.

I harangued them on twitter. They promised to reach out to me and fix it. They did reach out to me, claimed they saw the problem with the previous 'fix', fixed it again, delayed my next shipment by X months to get me back on track, and... it wasn't fixed. The delay worked but I was still receiving 90 pills every 60 days.

Ultimately I think it sorted itself out when a prescription had no more refills allowed and had to be renewed and entered as a new prescription number.

Just think of all the interesting data they will aggregate!

HIPAA would like to have a word with you.

> "It'd be cool if you kept that data encrypted at rest and kept track of every time it's accessed. Oh, you guys have a physical form everyone fills out when they access files? Perfect." - HIPAA in practice

Wholesalers don't have patient data. They sell to pharmacies. Still VERY valuable data, but HIPPA shouldn't be an issue.

This is happening with health insurance companies in Singapore. It sets a worrying precedent where patient/doctor confidentiality becomes obsolete. I'm not against my health data being collected anonymously for research purposes but I sure don't want the researcher to be my health insurance company.

Finally my dream of getting my cough legally prescribed meds cough dropped by a drone straight into my hands or mouth may come true!

Looks like thousands of Afghan children beat you to the punch there.

sounds bad for the opioid problem

That's a doctor issue, not a pharmacy issue. Although they're probably going to need some warehouses with higher clearance levels / restricted access to do this.

I'm all for Amazon filling prescriptions, healthcare is hugely inefficient and any bargaining power Amazon can wrestle away from pharmaceutical companies probably won't negatively impact the consumer.

> I'm all for Amazon filling prescriptions, healthcare is hugely inefficient and any bargaining power Amazon can wrestle away from pharmaceutical companies probably won't negatively impact the consumer.

I doubt RX prices will decrease if Amazon enters the market. Wal-Mart, Costco, and Express Scripts buy, warehouse, and dispense millions of drugs to patient members and drugs prices have barely moved.

I don't think they'd be selling controlled substances but who knows...

State laws for initial and subsequent RX for opioids and other schedule 2 drugs are very strict -

https://www.njafp.org/content/new-prescribing-law-treatment-...

I doubt Amazon will want to deal with the laws surrounding their dispensing. According to that NJ law you have to be a documented cancer patient or worse to get any leeway around how drugs are dispensed or prescribed to you.

Reply on news.ycombinator.com