Amazon eyes mail-order drug business – Consumer News

on Sep21

20 September 2017 | 6:00 pm

CORRECTED

Apparently overtaking the grocery industry isn’t enough. Three months after agreeing to buy Whole Foods for $13.4 billion, Amazon is in talks with pharmacy benefit managers, according to a note published by the investment bank Leerink Partners. The move indicates the retail behemoth may be preparing to enter the mail-order drug business.

Pharmacy benefit managers, or PBMs, are the powerful middlemen who control the flow of prescriptions to retailers like Walgreens and CVS. PBMs negotiate prices with pharmacies and drugmakers on behalf of corporate clients and pay their prescription drug claims.

Walgreens Boots Alliance has a tumultuous history with these third-party players. It actually created its own PBM, Walgreens Health Initiatives, in 1995, but the business never achieved the heft necessary to negotiate good deals for its customers. The Deerfield-based drug chain sold it for $525 million in 2011 to Catalyst Health Solutions, which is today part of UnitedHealth Group’s OptumRx, a large PBM.

More recently, former Walgreens CEO Greg Wasson gained notoriety by picking a fight with St. Louis-based Express Scripts, the biggest PBM of all. His seven-month battle over reimbursement rates in 2011 and 2012 forced millions of Walgreens customers to fill their prescriptions elsewhere. It remains unclear how many of those customers returned to Walgreens after the drug chain and Express Scripts forged a new deal, though analysts agree the fight cost Walgreens millions of dollars.

At the same time, archrival CVS was growing its own PBM, Caremark, into one of the biggest in the country. After Walgreens completed its union with Alliance Boots at the end of 2014, new CEO Stefano Pessina tried to fix the disadvantage created by lacking an in-house benefits manager. He began cutting deals with other PBMs, including Optum, the military’s Tricare program and Prime Theraputics, another huge PBM that works with 14 Blue Cross & Blue Shield plans.

Amazon’s conversations with some middle-market PBMs indicate the company is headed in the direction of handling prescriptions, according to a note from Leerink analysts, who spoke to pharmacy executives. The report said it would take at least 18 to 24 months for Amazon to receive drug licenses in every state.

Axios first reported the news.

References to Rite Aid and its EnvisionRX unit have been deleted from this article.



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