Amazon.com Inc. (AMZN - Free Report) can no longer be identified as just a retail giant. Always aiming to innovate, the company now plans to explore the new territory of prescription drugs. Reportedly, the e-commerce giant is trying to figure out a way to break into the multi-billion-dollar healthcare industry.
Let’s take a look at what Amazon has been doing to enter this space.
Coming to the share price, Amazon has underperformed the industry it belongs to on a year-to-date basis. The company’s shares have gained only 55% compared with the industry’s growth of 58.1%.
What Is Amazon Doing?
Citing sources, CNBC reports that Amazon has already been in talks with pharmaceutical company Mylan and the Sandoz division of Novartis. Both these produce a wide range of generic drugs.
In May, CNBC had reported that the company would be hiring a business lead to assist in this process, and is preparing to enter the pharmacy market, especially since the broader healthcare market could undergo serious change soon.
Soon news spread that Amazon had acquired pharmacy licenses in a dozen states. Although the company at that time had said that it did so to sell medical supplies, this definitely does also enable Amazon to sell drugs down the line, if it wishes to.
According to an analysis by Adam Fein, president of Pembroke Consulting, selling prescription drugs is a big business in the United States given that the retail pharmacy is a $400 billion industry.
Therefore, if Amazon succeeds in penetrating the market, it is sure to benefit and give other pharmaceutical companies stiff competition.
Amazon has already created ripples in a number of industries, namely book buying, retail shopping, groceries and Hollywood, using fierce customer loyalty and enormous reach. Its cloud business, Amazon Web Services, has been a key growth driver in recent times. Now, the fight for healthcare technology dollars is on and Amazon along with other tech biggies like Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) has targeted it in its own way.
Talking about Amazon, the company already sells medical supplies and equipment like blood pressure monitors, braces, hearing aids, and even walkers and wheelchairs in the United States. Entering the pharmacy industry does seem like a natural and lucrative next step for the company. However, it’s remains unclear if Amazon would sell drugs to consumers or just act as a drug wholesaler.
That said, it is for sure that even if Amazon enters this market, tasting success would not be that easy. The company might face major challenges related to government regulations and patient privacy requirements, which differ from typical retail.
Therefore, the e-commerce giant might need to device some serious strategies in order to foray into this industry and then stay there for long. The company might also need to acquire smaller established brands in this space. It could also partner with insurers or employers to give their customers a better deal.
Amazon has a long way to go. For now, we need to wait and watch how it plays its cards.
Amazon currently carries at a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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