Amazon signaling an interest in pharma

Change will come fast to the middle men of health care as Amazon enters the market, especially pharmaceutical distributors and potentially group purchasing organizations (GPOs) if medical supplies follow. CNBC recently gathered executives from the top 5 major drug distributors in the US to get their take on what this means for their business — check it out here first.

As a parallel, let’s take a look what happened to the grocery market in the two months following Amazon’s Whole Foods acquisition:

KGR down ~20%

SVU down ~15%

COST down ~ 10%

And it’s not like Whole Foods dominated the market pre-acquisition with an estimated <2% market share.

Add 1 part potential future stock shock should an acquisition be in play with this trailing 12 month performance of the top 5 drug distributors in the US as detailed in this CNBC article:

“McKesson, Express Scripts, Cardinal Health, CVS Health and Walgreens have lost a combined $43.5 billion in stock market value over the past year, while Amazon has picked up $95 billion in market capitalization.”

What do you get? A tasty $560bn opportunity.

Certainly there will be significant obstacles and expensive lessons to learn in Amazon’s entry to the highly-regulated pharmaceutical and supplies market should Bezos make the leap.

I just can’t get over the passing nonchalance of Walgreen’s CEO Stefano Pessina:

“I honestly don’t believe that Amazon will be interested in the near future in the next few years in this market,” Pessina said. They have so many “opportunities around the world and in other categories, which are much, much simpler than health care, which is a very regulated business,” he said.

I hope this isn’t Walgreen’s Amazon strategy. What does this remind me of? Oh yeah - Barnes & Noble, whose founder/CEO famously dismissed Amazon as a threat to the business. Over the past decade, B&N’s market cap has been drawn and quartered (well, trisected) by Amazon — from $1.5bn in 2006 to $.5bn in 2017.