Managing Editor’s Memo

Amazon Making Moves To Disrupt Health Care Industry

Frank Diamond

Well, why shouldn’t the humongous e-commerce site turn its attention to health care? It’s affected practically every other industry.

Amazon made headlines in May when it hired Mark Lyons, whose background includes being a pharmacy services manager at Premera Blue Cross in Washington. Lyons’s mission, according to press reports: Investigate the feasibility of Amazon becoming a PBM. And last month, Amazon’s growing presence in the medical supply distribution industry made news.

Some experts believe that Amazon might get a bloody nose trying to make inroads into the PBM industry. “I would never underestimate Amazon,” says Adam J. Fein, pharmacy pundit and expert on the inside baseball of the industry’s inside baseball (check out his website). “However, I believe that Amazon has limited feasible options for disrupting pharmacy and PBM markets.” That’s because our byzantine drug distribution and payment system resists disruptive innovation.

Here are the things that Fein believes Amazon will not be able to do: build or buy a PBM, become a central-fill mail pharmacy in a third-party payer’s network, or build or buy a specialty pharmacy.

Medical supply distribution is a different story. Amazon Business Platform, launched more than two years ago, is essentially a middleman for vendors. The platform offers services like business-to-business discounts and same-day shipping. Medical supply distributors want to sell to providers. And what do providers want? Things like IV bags, hospital beds, infusion pumps, scalpels, forceps, catheters—you name it.

Managed Care takes no stand on whether this will eventually be good or bad for health care. We only note what usually happens when Amazon sticks its gargantuan toe in the waters of any industry: a tidal wave. Competitors find themselves in a price war that they have very little chance of winning.

Just one more thing to think about as change swirls about us.


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