Amid broad anticipation that Amazon will soon get into the pharmacy business and disrupt the business of selling prescription drugs, pharmacy giant CVS Health announced Monday that it would launch a next-day prescription delivery service nationwide.
Amazon's entrance into the pharmacy business has been widely predicted by Wall Street — although the company has given no indication of its plans. But Amazon is thought to pose the biggest near-term threat to retail pharmacies such as CVS, Walgreens Boots Alliance or Walmart.
(Amazon founder and chief executive Jeffrey P. Bezos is the owner of The Washington Post.)
Starting in December, customers can take advantage of free, same-day delivery in Manhattan — a service that would expand to the District, Miami, Boston, Philadelphia and San Francisco in 2018, CVS announced. It said next-day delivery would roll out nationwide next year.
Outside experts see the announcement as evidence that competition is working.
“The prospect of Amazon entering has motivated CVS to do something they probably should have done years ago,” said Adam Fein, president of Pembroke Consulting. “I think it also is a great signal that Amazon is not going to be able to walk into the pharmacy or pharmacy benefit management industry and immediately take it over. There are many large, sophisticated, well-entrenched competitors who are going to defend their turf.”
Fein said that the pharmacy business has been slower to evolve than other retail sectors. People do not shop for prescription drugs as they do for other consumer goods — because they must receive permission, in the form of a prescription, to buy the drug and then depend on insurance to pick up most of the tab.
“CVS did announce that the company will introduce one-day prescription and same-day delivery in select urban markets. . . . Some would view this as a defensive move due to Amazon's potential entry into the market,” Ann Hynes, a managing director at Mizuho Securities wrote in a research note.
Martin Gaynor, an economist at Carnegie Mellon University, said that the mere threat of Amazon competition is likely to be good for consumers.
“That's what can happen when you get a fairly mature and staid industry where no one is innovating and everything is done a certain way, and an upstart threatens to come in,” Gaynor said.
CVS executives said the company is offering the service because it is always listening to its customers.
“Getting a prescription in 15 minutes or less is super convenient, but we wanted to add on to that. And so that's why you see us announcing what we did today,” Helena Foulkes, executive vice president at CVS Health, said during an earnings call.
A potential merger between CVS and the health insurer Aetna, first reported by the Wall Street Journal, is seen as a defensive move against possible Amazon entry by some experts — although others see it as a response to pressures in the health insurance industry and the business of negotiating drug prices. CVS executives did not comment on the possible merger.