Industry watchers have been parsing Amazon's every move to divine whether the company will upend pharma by moving into drug sales or distribution. But a new report says the tech and retail behemoth may go after a simpler market first.
That would be medical devices and supplies, according to a note from Jefferies analysts. The company has told regulators it won't "ship or store drugs," Jefferies analysts wrote in a new investor note. But Amazon does intend to sell medical devices and supplies from fulfillment centers in Indiana, according to the report, which is based on correspondence between the company and regulators. Jefferies obtained the info from a Freedom of Information Act request.
Last month, the St. Louis Post-Dispatch reported that the commerce giant had quietly attained wholesale licenses from multiple state pharmacy boards, citing a review of public records. Amazon has received at least a dozen licenses around the country, according to the publication.
The news from Jefferies doesn't completely discount the company's chances of entering pharmaceuticals, however, and many analysts still believe Amazon has its eye on eventually shaking up the drug distribution system.
"That said, we don’t think that [Amazon] would be unable to navigate the complex, mostly state-based regulatory environment that governs the distribution of prescription drugs if they chose to enter the space, but we believe there are other areas of healthcare that could and are being more easily disrupted than the Rx space," the analysts wrote.
Offering his opinion on the topic earlier this month, Bernstein analyst Ronny Gal wrote that his team believes the "simplest strategy" for Amazon to enter the drug space would be to establish a mail-order generic pharmacy and charge customers directly. Many mass-market generic prescriptions are under $5 at the wholesale level and cost several times that at retail, he noted. Gal suggested Amazon could charge its customers under $10 per generic prescription.
"They could expand to more complex segments of the market after they get their sea legs in the simple stuff," Gal wrote in the note.
As the Amazon chatter has grown louder in recent months, pharma CEOs have weighed in as well.
Allergan's Brent Saunders said on a recent quarterly conference call that the entire drug distribution "ecosystem is ripe for disruption." He added that changes should be associated with "improvements based on technology or efficiency," such as the way new treatments are reshaping care for patients.
Pfizer CEO Ian Read, for his part, 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." But Read said it's "somewhat more of a difficult strategic proposal" if the tech giant tries getting into the pharmacy benefit manager industry. That's a "whole different skill set," he added.
Amazon has stayed quiet about its pharma ambitions, but as Wells Fargo analyst David Maris put it in a note in October, "history has shown it is better to consider Amazon's disruptive potential beforehand rather than afterward." CNBC has reported the company plans to make its decision about entering pharmaceuticals by Thanksgiving.