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Amazon.com, Inc. (NASDAQ:AMZN) is expected to take a big step into pharmacy ━ because it can.
“We think that Amazon will enter the retail pharmacy industry, in large part because this is a large and disruptable market,” Bernstein analyst Lance Wilkes said in a Thursday note.
But its entry will be neither passive nor casual: “We think Amazon is well positioned to address [and] impact the major customer issues in this market.”
By Wilkes’ estimate, Amazon can capitalize on the $300 billion industry’s high single-digit margins by exploiting a lack of pricing transparency, expense inefficiencies and competitors’ weaker e-commerce infrastructure.
A Team Effort
The company won’t likely achieve this on its own, according to Bernstein.
“We do expect that Amazon will need to partner with or acquire a PBM [pharmacy benefit manager] to drive volume growth,” Wilkes said.
He sees ideal partners in OptumRx and other large PBMs owned by managed care organizations, and attractive takeover targets in small PBMs with “low mail order penetration and limited economics,” like MedImpact or Rite Aid Corporation (NYSE:RAD)’s EnvisionRx.
At the same time, he foresees partnership interest from UnitedHealth Group Inc (NYSE:UNH).
The Amazon Impact
Amazon’s existing online interface and capacity to automate distribution position it for sector-wide disruption, driven primarily by reducing operating cost standards and slashing retail prices by about 10 percent, according to Bernstein.
“The major advantages come from eliminating 70,000 retail locations (and related staffing and other expenses), which could be replaced by automated distribution centers with efficient pharmacist oversight,” Wilkes said.
By these considerations, Amazon’s entry into the space would negatively impact PBMs and independent pharmacies, while proving “somewhat negative” for national retailers and distributors.
Related Links:
A Guide To Guessing Where Amazon Is Going
Amazon Vs. Alphabet: The Race To $1,000 Per Share
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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