It's no secret Amazon.com Inc. (AMZN) is eyeing the pharmaceutical market, and Wall Street firm Cowen thinks the online giant should acquire Rite Aid Corp. (RAD) to speed up its entrance. (See also: Why Amazon Should Buy CVS Health.)

In a research note to clients, Cowen analyst John Blackledge argued that if the Seattle e-commerce stalwart were to open pharmacies in Whole Foods locations and on Prime, it could pick up market share gains at an accelerated pace if it bought the drugstore chain. "Our Cowen proprietary survey data suggests 67 percent of Amazon Prime members would purchase prescription drugs through Amazon if they were available," wrote Blackledge in the note covered by CNBC. "Depending on the pace Amazon would seek to enter the market, an acquisition such as Rite Aid could accelerate the pace and be a relatively low-risk acquisition given that it currently trades at an enterprise value of only about $5 billion." Rite Aid closed Tuesday’s trading session up 5.13% or $0.08 to $1.64. (See more: Amazon Will Not Store or Ship Drugs: Report.) 

State-by-State Progress

Speculation has been surging in recent weeks that Amazon is gearing up to disrupt the pharmaceutical market. The news of its potential entrance has put drugstore operators on notice and even prompted CVS Health Corp.'s (CVS) to make a $66 billion offer for health insurer Aetna Inc. (AET). In late October, the St. Louis Post-Dispatch, using public records, reported Amazon won approval from 12 states to sell pharmaceuticals. The states to approve the license are Nevada, Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New Hampshire, Oregon and Tennessee. Amazon is currently awaiting confirmation from the state of Maine. A person familiar with the matter told the Journal the licenses are needed in order for the company to sell medical wholesale equipment to professionals through its business-to-business marketplace.

The way Cowen’s Blackledge sees it, if a deal between Amazon and Rite Aid did happen, the retail pharmacy business could make $20 billion in 2019, commanding 10% of the market. The online retailer would get pharmacy licenses in 19 states, six distribution centers and more than 2,000 retail stores that have already gotten regulatory approval. But it's not just hawking prescription drugs that Blackledge thinks the company has up its sleeves when it comes to the pharmaceutical industry. He thinks it could become a pharmacy benefit manager (PBM) as well.

"A simple case one can make for Amazon to enter the PBM space is that it can serve as its own mail pharmacy, and capitalize on Prime 2-day delivery. From there, Amazon could build out its own retail network, and find itself working with other retail pharmacy chains to participate in its retail network," the analyst wrote in the note to clients.

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