Innovative Approaches to Patient Care in Pharmacy
Speculation is rampant lately about the possibility of Amazon’s entry into pharmacy and whether the recent CVS/Aetna merger is a related defensive move.
One can argue that Amazon is already driving disruption by pushing CVS to vertically integrate businesses in order to further cement market share. That may be true, but looking back at similar moves by CVS over past years, this makes perfect sense for them as they continue their transformation to a fully integrated health care business.
Whether you consider these acquisitions to be threatening or not, it’s hard to argue against their success. It is simply a continuation of the “retailization” of healthcare that the Minute Clinic and Caremark acquisitions represented. CVS/Aetna expands the ability to demonstrate pharmacy’s value beyond PBMs to health plans and overall outcomes.
As for Amazon’s entry point, it’s hard to believe that they can be successful with pure product distribution. Where is the edge against the big three wholesalers? Ever-shrinking reimbursements and an established mail-order ceiling of 10% among PBM and Plan models, even with financial incentives to the patient, make a pure mail fulfillment play an uphill battle to say the least.
Amazon will need strong verticals to exert its influence across the continuum from product acquisition and distribution to fulfillment and reimbursement. In order to attract the payer community in any significant way, Amazon would certainly need expertise and innovation around the delivery of quality patient care and demonstrable positive outcomes.
It doesn’t seem logical that Amazon would be successful in pharmacy today without the support of a substantial brick and mortar infrastructure. It could be that their recent acquisition of Whole Foods would represent an entry point; however the demographic of the typical Whole Foods customer doesn’t seem to fit. An acquisition of a chain like Rite Aid would seem more appropriate. The store footprint and established relationships would flatten the learning and growth curves significantly. Further, it would have parallels with a move from earlier this year when they announced a reverse distribution partnership with Kohl’s.
Where will it lead?
Amazon already excels at some of the core competencies that would be required to disrupt pharmacy: effective product procurement, efficient logistics and order fulfillment to name a few. Now, consider a substantial brick and mortar presence rounded out with the power of data integration, artificial intelligence, and contact centers and you begin to see a clearer path to disruption. What’s still missing are clinical expertise and, of course, patients. Which brings us back to the CVS/Aetna deal.
CVS took the next logical step beyond PBMs with the acquisition of a large health plan. Without a similar move and subsequent significant book of business at the outset, Amazon’s success would seem less likely.
Lastly, to truly be disruptive, Amazon will need to address the fastest growing and arguably most complicated segment of the pharmaceutical business—Specialty Pharmacy. Without Specialty, the prospects for future growth will be hampered. An acquisition here seems just as likely as a health plan acquisition for the same reasons: book of business and learning curve.
As threatening as these models appear to the rest of the pharmacy community, the bigger threat is stagnation. In short, the disruption has already begun. Whether the impetus was CVS or Amazon is less clear and even less important. For providers, the imperative of quality patient care delivery and its value to the payer or partner seems likely to continue.
Those willing and able to leverage technology will be better positioned to play a role in new innovative approaches to care for high-value patients and ultimately better financial results for payers.
Contact us to learn more about how your pharmacy can benefit from intelligent patient engagement and more from Claro™ Pharmacy Solutions.
Alphonse J. Sasso
VP of Business Development