- Amazon’s rumored plan to distribute pharmaceuticals to hospitals through its business platform has been put on ice, CNBC reported. Other drug supply chain companies’ stocks jumped on the news, including CVS Health, Walgreens Boots Alliance, Cardinal Health and McKesson Corporation.
- The difficulty of transporting temperature-sensitive drug products may have contributed to the pullback. Amazon’s infrastructure does not yet have a temperature-controlled supply chain in place.
- Analysts at Jefferies and Leerink note that while Amazon may in the future decide to move into the space, factors such as loyalty to existing suppliers and other structural impediments must be resolved.
The report is not entirely unexpected. Amazon in December canceled its pharmaceutical wholesaler application in Maine and told state regulators it did not intend to sell drugs.
The latest report demonstrates the challenges of entering the health system supply chain.
Amazon has struggled to gain a working relationship with large hospitals, which depend on several shipments per week, according to CNBC. Most providers are satisfied with their group purchasing organization and are hesitant to disrupt existing distribution relationships for highly sensitive medical products, according to Leerink.
“Typically, we believe that large hospitals have established distribution processes and relationships in place, and typically these large hospitals are reluctant to disrupt those established systems — especially for highly sensitive medical products that have a significant impact on patient care,” Leerink analysts said in a note.
The commerce giant is still reportedly selling “less sensitive medical supplies” to hospitals and clinics through the platform.
Amazon would not speculate on the report to Healthcare Dive, but a spokesperson suggested that its Amazon Business unit is still working in medical supplies and with health systems.
"We are constantly growing our selection to meet the needs of business customers, as well as provide manufacturers and distributors with the opportunity to reach new business customers," the statement said. "Many large health systems have numerous satellite facilities, and as care shifts closer to the home, they need to address gaps and invent new ways to simplify supplies moving to locations beyond the hospital."
Jefferies analysts noted that the CNBC report echoes their own internal research that Amazon’s potential move into the drug supply chain was a low probability given the challenges moving into the space.
Specifically, the analysts pointed to high levels of federal and state regulation, the need to separate distribution and storage from the company’s existing infrastructure and the need to contract with pharmacy benefit managers as barriers to entry.
Amazon is also still looking to enter the healthcare space along with J.P. Morgan Chase and Berkshire Hathaway. In January, the companies announced they would be creating a new company aimed at lowering the healthcare costs for their employees.