There’s been plenty of speculation about Amazon's intentions in pharmaceuticals, and now Johnson & Johnson’s CEO has weighed in on how the tech giant could affect drug markets by shaking up pharma distribution and reimbursement.
Speaking with Fortune’s Susie Gharib, J&J CEO Alex Gorsky said megamergers in healthcare, such as the Aetna/CVS megamerger and Cigna’s Express Scripts buyout, demonstrate that “there is a lot of pressure in the system right now.” And as J&J knows firsthand from its consumer products business with Amazon, the retail giant's vaunted distribution efficiencies and broad consumer reach could help ease some of that pressure.
“We have conversations at all levels going on with Amazon. I think Jeff (Bezos) and as importantly Amazon is a very innovative organization, and they see this as an opportunity to make a difference," Gorsky said. "Just as we are partnering with them today in areas of our consumer products, we’ll look forward to partnering with them in the future in some of these other areas as well.”
It’s clear what Amazon could offer in distribution expertise, but the company could also explore changes in reimbursement, where drugmakers have complained about growing rebates for years.
"We all know there are inefficiencies in the current system,” he said during the interview. “So whether it’s distribution, whether it’s reimbursement, whether it’s the way that we insure, all of those are significant opportunities. At J&J, we would welcome those kind of entrants into the market.”
The conversation comes amid a time of significant change in the U.S. drug pricing ecosystem brought about by years of attention to price increases and rebate growth. Notable developments in the field recently have been Amgen’s move to cut its list price on PCSK9 cholesterol drug Repatha by 60%, Gilead’s decision to launch authorized generics of its own drugs and mergers between PBMs and insurers.
Amazon, for its part, has reportedly been eyeing pharmaceuticals for more than a year. In January, the company teamed up with Berkshire Hathaway and JPMorgan to form a joint venture aiming to lower healthcare costs.
Then, in June, Amazon purchased independent pharmacy PillPack, giving it access to the startup’s pharmacy distribution system. PillPack, which packages each patient's drugs by date and time of dosing, is authorized to ship drugs in 49 states, Reuters reported at the time. In the wake of the deal, Evercore ISI analysts wrote that it's "undeniable" Amazon is entering the pharmacy industry, according to CNBC.
Gorsky isn’t the only pharma CEO to weigh in on Amazon. Amid heated speculation about Amazon’s intentions in pharma late last year, Pfizer’s Ian Read said "any system of distribution that can cut costs and get a wide availability of products to patients is something that the whole industry would be interested in." Allergan CEO Brent Saunders said the "whole ecosystem is ripe for disruption."