New Amazon online pharmacy service will compete against CVS and Rite Aid

Though long expected, the announcement rattled the drugstore industry, sinking the shares of all of Amazon’s news rivals. Shares in both CVS and Walgreens Boots Alliance slid about 9 percent in midday trading. Rite Aid’s stock fell more than 15 percent. (Amazon chief executive Jeff Bezos owns The Washington Post.)

Prescription drug sales will approach $360 billion this year, according to a forecast from the Centers for Medicare & Medicaid Services, an agency within the Department of Health and Human Services. With the ongoing coronavirus pandemic, Amazon Pharmacy hopes to take advantage of the burgeoning interest in shopping from home.

“As more and more people look to complete everyday errands from home, pharmacy is an important and needed addition to the Amazon online store,” senior vice president Doug Herrington said in a statement announcing the move.

Amazon Pharmacy is available, for now, to customers in every state except Hawaii, Illinois, Kentucky, Louisiana, and Minnesota, where regulations require technical capabilities that Amazon hasn’t built yet into the online store, Amazon spokeswoman Catie Kroon said via email. The company is planning to add those states in the coming year.

As with other pharmacies, Amazon’s service will require prescriptions from licensed healthcare providers. The company said it will securely manage customer information in compliance with the Health Insurance Portability and Accountability Act, or HIPAA. And it said it will not share information that is protected by law outside of its pharmacy for marketing purposes “without clear permission from the customer.”

Amazon also said it will not sell so-called Schedule II controlled medications, which include most opioids. And Amazon will offer phone access to customer care at any time to answer questions about medications.

Prime members will be eligible for prescription discounts at more than 50,000 pharmacies nationwide, including CVS, Walgreens, Rite Aid, as well as longtime rivals Walmart and Costco. That offering is administered by Inside Rx, which provides access to medication for self-paying consumers.

For Amazon, online prescription drug sales are a way to provide another benefit for Prime members, its most lucrative retail customers. The company has said it has more than 150 million Prime members worldwide.

“Amazon Pharmacy offers yet another path to decrease churn while, at the same time, increase engagement among Prime members, ultimately resulting in further revenue upside over the next few years,” UBS analyst Eric Sheridan said in a note to clients.

Amazon Pharmacy builds off PillPack’s mail-order prescription-drug business, which had already developed much of the needed infrastructure, from negotiating with payers and benefit managers to procuring medications. PillPack’s business of helping customers manage multiple daily medications for chronic conditions will continue as a distinct service, the company said.

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