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Cantor Fitzgerald Not Worried About Amazon's (AMZN) Entry Into Prescription Market

June 28, 2018 9:47 AM EDT
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Cantor Fitzgerald analyst Steven Halper is not worried about Amazon (NASDAQ: AMZN) entrance into the prescription market with today's acquisition of PillPack and asks if this is Drugstore.com Part 2.

Halper notes PillPack is a pharmacy provider that uses "pouch" packaging solutions to help increase medication adherence for patients. They remind investors that pouch packaging is not a new technology.

"At this juncture we are not worried about Amazon's entrance into the prescription market. Pharmacy networks are controlled by managed care companies and pharmacy benefit managers with captive mail order capabilities," Halper commented. "Payers typically require health plan members to use their captive mail order pharmacies. Even if PillPack is a network provider today, it does not mean it will be a network provider in the future, especially if AMZN has designs of significantly ramping its prescription volume."

"This was the exact issue that Drugstore.com (Amazon owned 40% of Drugstore.com) had in the late 1990s/early 2000s. Given the competitive threat, the PBMs did not include drugstore.com into their respective pharmacy networks so only cash paying customers could really use it (with one minor loophole). Eventually, Drugstore.com exited the prescription business and focused on OTC products. The company was then purchased by Walgreens (WBA - NC), and then subsequently shut the whole site down. Perhaps Amazon/PillPack could have some success with smaller payers seeking different mail order solutions."

"At this juncture, we do not expect a material impact on any of coverage companies in the managed care segment. We continue to rate the shares of Aetna (AET), Anthem (ANTM), Centene (CNC), UnitedHealth Group (UNH) and Wellcare (WCG) at Overweight. Our rating on Humana (HUM) remains at Neutral."



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