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Amazon’s pharma ambitions ramp up, causing pharmacy distribution stocks to plunge

Amazon distribution centre

It has recently been reported that Amazon has received regulatory approval to undertake operations as a pharmacy wholesale distributor in over 10 US states. The news is set to further disrupt the pharmacy market and see Amazon further its healthcare ambitions worldwide.

The news has sent pharmacy shares down by up to 13%, highlighting how much of a threat Amazon’s move into the market could be for the industry’s major players. It has also now obtained the domain AmazonRX, Wells Fargo has reported.

The company has received approval from Arizona, Nevada, Alabama, North Dakota, Connecticut, New Hampshire, Tennessee, Louisiana, Oregon, Michigan, Idaho and New Jersey. Maine is still pending.

The prescription business remains a competitive space, with players constantly looking to seek advantage through competitive pricing, acquisitions or investment in new technologies. Additionally, the US is seeing its pharmaceutical market under scrutiny as a result of the Trump Administration and its effect on the Affordable Care Impact, impacting thousands of families.

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However, the e-commerce industry is also turning into a competitive space. Although Amazon currently sells medical devices, it could look to rival Walgreens or Target, which saw its pharmaceutical division bought by CVS Health.

Nonetheless, with Amazon encroaching upon the market, competitors are joining forces to fight off the pull of Amazon and its ability to lure its customers in order to survive. CVS Health is presently looking to acquire Aetna in a new merger, in order to consolidate and strengthen its position within the prescription drug market.

Wells Fargo analyst David Maris also commented: "We find it easy to envision that, if it entered pharmacy, Amazon could offer unique value to some customers, such as the easier ability to manage prescriptions and perhaps discounts, such as free generics to Prime users.”

“Overall, we think that even though Amazon has not stated a goal to be in pharmacy, history has shown it is better to consider Amazon's disruptive potential beforehand rather than afterward."

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