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Our Take: Amazon rattles the pharmacy industry with its long-awaited launch

Nov 23, 2020

Editor’s note: Because of the upcoming holiday, Our Take will return on Dec. 7. We wish you and yours a safe and happy Thanksgiving.

Amazon got the attention of the entire pharmacy industry last Tuesday when the massive retailer announced that Amazon Pharmacy was open for business. CVS Health, Walgreens, Rite Aid, and GoodRx all saw their stock prices drop after the news came out.

Just like with other merchandise on Amazon, customers can now shop Amazon Pharmacy to see which medications are available, including brand-name and generic versions, as well as what forms and doses are available. They can see what their copay is, what price they would pay without insurance, and how much they could save using the new Prime prescription savings benefit that Amazon introduced along with the online pharmacy.

Pharmacists are available around the clock to answer questions. Refrigerated medications, including insulin, are available for purchase, but Schedule II controlled drugs are not.

To use the online pharmacy, customers complete a secure pharmacy profile, including their insurance information, and then have their health care provider send new or existing prescriptions to Amazon Pharmacy to be filled. After that, they confirm the request on the Amazon website or the Amazon App, choose how they want to pay, and then wait for the prescription to be delivered.

According to Amazon, Prime members can save up to 80% on generic drugs and 40% on brand-name drugs through the Prime prescription savings benefit when they pay without insurance. The benefit can also be used to receive discounts on prescriptions “at over 50,000 other participating pharmacies nationwide,” Amazon said. Unlimited free two-day delivery is also part of the deal for Prime members.

Inside Rx, a subsidiary of Evernorth, which until recently was Express Scripts, will administer the Prime prescription savings benefit.

Our Take: Well, it finally happened. This move by Amazon has been quite a while in the making, so it’s not as though it really took anyone by surprise.

Even though the big chains saw their stock fall when Amazon made its big splash on Tuesday, John Boylan, an analyst with Edward Jones, said Amazon’s entrance into the pharmacy market will mostly affect smaller drugstores, The Associated Press reported.

Yes, of course the smaller pharmacies are going to take a much bigger hit than the giant chain pharmacies will, or even compared with the pharmacies in grocery stores. People who get their prescriptions filled at Fry’s or Kroger, or Walmart or Costco, might not be motivated enough to go to the trouble of having their prescriptions transferred unless the savings at Amazon are truly significant — and they very well may be.

The national chain pharmacies have been devouring the neighborhood mom-and-pop pharmacies for decades, and now there’s a good chance that Amazon will kill off the ones that have managed to survive. But they probably aren’t the only businesses that are at least a little terrified right now. We’re pretty sure that the pioneering online pharmacies — like GoodRx and Blink Health — are feeling kind of queasy too.

CVS and Walgreens have been prepping for this for several years. One or both have been opening up in-store, primary care clinics to expand their services, partnering with other businesses to offer delivery options, and experimenting with pared-down, “small format” stores that offer little more than prescriptions in some locations. And it’s a pretty safe bet that CVS will retain most Aetna plan members’ prescription business, now that Aetna is part of CVS. Plus, CVS Health has its pharmacy benefit management (PBM) business.

But Craig Garthwaite, a health economist who teaches at Northwestern University, pointed out in the AP article that Amazon could evolve in this segment just like CVS and Walgreens and Walmart have.

“We could think of this one day as the first step toward Amazon becoming a PBM,” Garthwaite said.

At this point, we wouldn’t be much surprised by anything Jeff Bezos decided to try.

What else you need to know
The FDA will move “as quickly as possible” to authorize the COVID-19 vaccine candidates that Pfizer/BioNTech and Moderna are currently testing in Phase III trials, Health and Human Services (HHS) Secretary Alex Azar said last Monday, according to CNBC. The news outlet reported that Azar said the FDA has dedicated teams working with the drug companies to “remove any unnecessary bureaucratic barriers.” He added that the clearance process would be “consistent with just making sure the science, the evidence, and the law support authorization.” Dr. Peter Marks, who is director of the FDA’s Center for Biologics Evaluation and Research, told Business Insider earlier this month that the FDA would have “a very open [review] process,” and that vetting a potential vaccine could take weeks. Dr. Marks said he would resign if the proper vetting process is not followed.

Pfizer and BioNTech submitted a request to the FDA on Friday for emergency use authorization (EUA) of their mRNA vaccine candidate, BNT162b2. Cambridge, Mass.-based Moderna said last Tuesday in a news release that the European Medicines Agency has started a rolling review of its mRNA vaccine candidate, and Business Insider reported on Saturday that Moderna plans to file a request with the FDA for EUA of the vaccine later this month or early in December.

When COVID-19 vaccines do become available, HHS said it has developed a plan to provide widespread access to them. The agency said in a press release that it is partnering with regional pharmacy chains and independent community pharmacies on a program that will include approximately 60% of pharmacies in the U.S., Puerto Rico, and the Virgin Islands. HHS said the vaccinations would be administered at participating locations at no cost to patients and encouraged pharmacies that are not participating in the program to coordinate with local health departments so they can become a vaccine provider.

CMS announced a payment model called the Most Favored Nation (MFN) Model on Friday, along with a corresponding interim final rule and comment period. Under the model, Medicare would pay no more for 50 commonly prescribed Part B drugs and biologicals than the lowest price that manufacturers of the drugs receive in “other similar countries.” The model also changes the add-on amount that providers will receive for the drugs. Currently, providers receive a percentage of a given drug’s cost. Under the new model, they will receive a flat amount per dose of a given drug. With certain exceptions, participation in the MFN model is mandatory for most Medicare providers and suppliers, CMS said. The model is scheduled to begin on Jan. 1 and will run through Dec. 31, 2027, but is likely to be challenged in court.

Separately, HHS finalized a rule on Friday to eliminate the current rebate system used for Medicare Part D drugs. The rule, which is slated to take effect on Jan. 1, 2022, excludes from “safe harbor” protection the rebates that drug companies pay to PBMs and Part D plans. It creates new safe harbor protection for 1) discounts given at the point of sale, and 2) fixed-fee services agreements between drug manufacturers and PBMs. HHS said the rule could result in savings to patients of nearly 30%, but the Congressional Budget Office estimated that the rule “would increase taxpayer costs by $177 billion over 10 years,” according to the American Journal of Managed Care. Both rules are pursuant to executive orders the president signed earlier this year.

AdventHealth, Atrium Health, and Henry Ford Health System are among the 34 health systems that will partner with Premier and DeRoyal Industries in a joint venture to address isolation gown shortages caused by the pandemic. The intent is to ramp up domestic production and thereby reduce dependence on overseas manufacturers. Premier said in a press release that the gowns will be manufactured at a facility near Knoxville, Tenn., from raw materials sourced predominantly in the U.S., and noted that the first gowns are expected to be available by midyear 2021. Each of the health systems signed a multiyear agreement to buy a portion of the gowns every year for the term of the contract.

Johnson & Johnson (J&J) and UnitedHealth Group (UHG) are collaborating to share information with UnitedHealth members, customers, patients, and employees about J&J and Janssen Pharmaceutical’s second Phase III COVID-19 vaccine candidate trial. The goal is to speed up enrollment in the trial by steering potential participants to a website where they can pre-enroll and receive details if there is a nearby enrollment site. According to a post by UHG, the company will also use deidentified data from UnitedHealth and Optum records to help Janssen identify populations with higher incidence of COVID-19. Janssen will use the information in deciding where to establish future trial sites.

Ochsner Health has committed to spending $100 million in the next five years as part of a 10-year plan to improve the overall health of Louisiana residents. The money is considered an initial investment, Ochsner said in a news release, and will be used to support projects — such as the opening of 15 community health centers in underserved areas — that will eliminate barriers to care while improving health equity and patient outcomes. The Ochsner Scholars Program is another component of the plan; starting next year, the program will cover medical school tuition for students who agree to practice psychiatry or primary care with Ochsner in Louisiana. The health system will also partner with Xavier University to develop the Ochsner Xavier Center for Health Equity, which will address issues responsible for health disparities.

What we’re reading
Evaluation of Medicare alternative payment models: What the data show. Health Affairs, 11.12.20
Balancing virtual and in-person health care. Harvard Business Review, 11.17.20
 
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