The Healthcare Makeover: Is Evolution or Amazon the Catalyst?

Jim Gorman
Jim Gorman Director, Mizuho Americas
April 17, 2018

For months, there has been speculation that Amazon is about to enter into the pharmacy business. And for months Mizuho Healthcare Services Analyst Ann Hynes has been one of the few, if not the lone, analyst saying it is unlikely to happen. 

Meanwhile, the industry seems to be making moves that, if not specifically aimed at an Amazon threat, are at least creating an ever narrowing path for the serial sector dominator. Last year’s deals between pharmacies Walgreens and Rite Aid, and pharmacy CVS and health insurer Aetna, were joined in March by the proposed tie up of health insurer Cigna and pharmacy benefit manager Express Scripts. It seems the healthcare sector has seen more pairings than a square dance. 

And the music shows no signs of stopping.

The mergers and mutations keep coming.

Following CVS’s announcement in December of its acquisition of Aetna, Hynes emphasized her belief that this “vertical integration of retail pharmacy and managed care brings the next generation of formulary management in healthcare services.” In essence, this new frontier does not appear to be something that can be easily duplicated through quicker, cheaper internet marketplaces alone.

Further complicating the road for any Amazon advance to succeed, Hynes wrote that “M&A is a NECESSITY” (emphasis not added). But, as we have seen, viable partners are getting scarce.

Does Amazon have a chance?

In that same report, Hynes was quick to question the notion that Amazon could seamlessly enter into the space saying, “we have been steadfast in our belief that Amazon will NOT enter the pharmacy market.”  However, if they do try, they have their work cut out for them. Amazon's current model would not translate into healthcare, an industry which is “complicated on both the B-to-B side (chain of custody of the product matters) and B-to-C (patient access).”

Relationships or clicks? 

The healthcare industry is drilling further down to the neighborhood level and the bond between pharmacist and patient. Will that prove to be more valuable than the relationship of local merchant to local customer that has largely been replaced by the internet? Ann Hynes thinks healthcare is a more personal experience. And the trend of mergers and acquisitions in the sector seems to be bearing that out.

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