Amazon remains bullish on pharmacy

Amazon’s move into the pharmacy business is “off to a good start,” CEO Andy Jassy said at the online retail giant’s first quarter earnings call Thursday, indicating that the company will continue its efforts to gain market share.  

That could be a big challenge to supermarkets and drug stores, which capture more than four out of every five shoppers in the space.  

Amazon made some major changes in its approach to pharmacy in 2022, purchasing primary care provider One Medical for $3.9 billion in July and shuttering its telehealth service, Amazon Care, in December.  

Jassy told analysts Thursday that Amazon is looking to claim its piece of the highly segmented, multitrillion dollar healthcare industry. 

"We had what we thought were some differentiated ways that we could be successful at it," he said. 

Pharmacy could be a big opportunity for the retail giant, according to a survey released in April by CPG/retail sales and marketing firm Advantage Solutions, which showed that nearly two-thirds (64%) of all prescription medications are purchased in drug stores and another 17% through grocery store pharmacies. 

At the earnings call, Jassy criticized the often laborious process of visiting a doctor and getting a prescription, adding that he believes Amazon can make the chore more efficient.  

"[I]f you look at the experience that's been the case for the last several decades, we're going to have a hard time convincing our grandkids that it used to be the case to get a primary care appointment, you had to call ahead of time, a month ahead to schedule an appointment and drive 20 minutes to the doctor and park and get into the facility and wait 20 minutes in reception,” he said. “And you get into an exam room, you wait 10 minutes for the doctor to come in. The doctor talks to you for five minutes and then prescribes you medicine where you drive 20 minutes to go get the medicine. And that experience just doesn't make sense and won't be the case.” 

The company’s initial move into streamlining the process was through Amazon Care, which it rolled out in 2019 to select Amazon employees. That program expanded to include non-Amazon employees, but in August of 2022, the company said in a leaked memo that it would discontinue Amazon Care at the end of the year. “This decision wasn’t made lightly and only became clear after many months of careful consideration,” said Neil Lindsay, Amazon Health Services senior vice president, in the memo. “Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.” 

On Thursday, Jassy said customers loved the service but Amazon “didn’t have the right business model there.” 

“But we came across One Medical where the digital app is very compelling, and you can talk to a medical practitioner by chat or by video conference, or if you have to come into a physical facility, they have clinics around the country and you can get that appointment same day or next day. In all those cities, they have relationships with health specialists where you're plugged into,” Jassy said. 

The decision to focus on One Medical over Amazon Care was in part due to the ease of use and efficiency the service provides, Jassy explained. Patients are typically able to get an appointment within a day or two, according to Jassy.  

“And then when you need medicine, you can have it automatically shipped to you by Amazon Pharmacy or other third-party pharmacies," he said. "It's a very, very different experience, and we think we have an opportunity to be successful in helping change that experience. And if we're successful with primary care and with health and with pharmacy, there are a lot of other things we can help customers with as well. So we think that's a big opportunity.” 

The retailer has continued to make incremental advances in healthcare this year, with the January launch of RxPass, a service for Amazon Prime members that offers a variety of common prescription drugs for a flat fee. Amazon also released “Coupons on Amazon Pharmacy,” in March, a service that automatically applies any available coupons to prescription medication purchases through Amazon.