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Amazon Pharmacy: Pharmacies hardly have to fear

2020-12-01T21:12:43.080Z

The news of Amazon's entry into the drug trade caused the stocks of established players in the industry to collapse. But the concerns about displacement are possibly exaggerated this time.



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Dreaded opponent

: When Amazon enters a new market, the great tremors often begin

Photo: JOHANNES EISELE / AFP

The procedure has already been practiced: Amazon is starting a new business division, and the industry that the online giant is entering is starting to tremble.

This time the setting: the drug business, traditionally the domain of the drugstore and pharmacy industry.

Almost two weeks ago Amazon announced the launch of "Amazon Pharmacy" in the USA.

Company founder and boss

Jeff Bezos

(56) is

entering

the mail order business with prescription drugs.

Investors apparently viewed this as a serious threat to those companies already in the business.

Shares of large US pharmaceutical dealers as well as drugstore and pharmacy chains such as CVS Health, Walgreens, Cigna, UnitedHealth or Rite Aid suddenly collapsed.

Within a few hours, the corporations lost billions of dollars in market value - for the most part they have not yet fully recovered from the price losses.

Amazon's papers, on the other hand, continued to increase in value at the same time.

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The stock market's concern is clear: Amazon will stir up the market, gain market share, increase its profits - and drain the rest of the industry until it becomes dangerous for these companies.

But is this concern also justified?

Experts express doubts.

In any case, the drastic reaction of the stock exchange seems exaggerated.

Because the news of Amazon's entry into the medical trade came as no surprise.

In 2018, the online giant took over the Internet pharmacy PillPack for more than 700 million dollars.

Long before that, there had been speculation about Amazon's entry into this business, which has not decreased since then.

"Not the area where money is made"

"People are freaking out," the Financial Times also quotes an industry analyst from Jefferies with a view to the reaction of the stock market.

"There is hardly any reason for this, at least not in the near future."

Reason: Unlike other retail products such as books or consumer electronics, many people still like to go to the pharmacy around the corner to buy medication, where they can also get personal advice.

Many older people, according to the Jefferies analyst, even consider this excursion the "highlight of their week".

In addition, there is still a large proportion of pharmaceuticals that are out of the question for online trading.

According to the "Wall Street Journal", examples are flu vaccinations and, presumably soon, Covid-19 drugs.

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One consequence of this background is that Amazon will probably appeal to less lucrative groups of buyers, as Lawton Burns, professor at the University of Pennsylvania's Wharton School, believes.

"You may reach the young millennials who need an acne remedy occasionally," Burns said, according to FT.

Or young people with herpes or the desire for contraception.

"That is not the area in which money is made in the drug trade," says the expert.

Overall, online shipping still has a share of less than 10 percent of the overall business, according to the "FT" with reference to data from the Drug Channel Institute.

Higher-priced preparations for chronic or complex diseases such as cancer, multiple sclerosis or HIV therefore have a higher proportion.

According to the newspaper, "Amazon Pharmacy" does not offer these products.

So it's no wonder that the future competition from Amazon's new online pharmacy is still relaxed at the moment.

This is a serious competitor, "says James Kehoe, CFO of Walgreens, the second largest pharmacy chain in the US after CVS Health." But we compare apples to oranges a little: If you need a cure for Covid-19 - turn it around You then contact Amazon or Walgreens or CVS? "

cr

Source: spiegel

All news articles on 2020-12-01

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