Amazon.com Inc. (AMZN) has told regulators that the pharmacy licenses it recently obtained from Tennessee and Indiana will be used to sell medical devices and supplies, rather than prescription drugs. (See also: Amazon Has Wholesale Pharmacy Licenses in 12 States: Report.)
Analysts from Jefferies broke the news after gaining access to correspondence between the company and regulators from the two states through a Freedom of Information Act request. According to the New York-based investment firm’s findings, reported on by CNBC, Amazon has no intention to use the licenses it secured in October to store or distribute prescription drugs online, despite recent reports suggesting otherwise.
Jefferies added that it could still be possible for Amazon to find a way to navigate the complex prescription drug space. However, based on the correspondence, the firm’s analysts said it’s more likely that the e-commerce giant will first focus its attention on selling medical supplies, such as surgical equipment and other devices.
This move, Jefferies claimed, will provide an immediate threat to medical distribution companies, including McKesson Corp. (MCK) and Cardinal Health Inc. (CAH), rather than the big pharmacies that Amazon was reportedly set to go after. Shares of pharmacy chains like CVS Health Corp. (CVS) and Rite Aid Corp. (RAD) rose after the report was published.
Only A Matter of Time?
More details about Amazon’s potential foray into the prescription drug space could be revealed later this month. Sources familiar with the situation told CNBC in October that the company is set to decide before Thanksgiving whether to enter the market, which is believed to be worth $560 billion per year.
CNBC claims that most industry experts believe it’s only a matter of time before Amazon starts selling pharmaceuticals online. Adam Fein, president of Pembroke Consulting and a drug supply chain expert, is not so convinced. (See also: Evaluating Amazon's Chances in the Pharma Industry.)
"There has been a massive overreaction to the Amazon threat," Fein said to CNBC. "I would never underestimate Amazon. But I remain somewhat skeptical of Amazon's ability and desire to fundamentally alter the drug channel [as] the incumbents will have many opportunities to defend their position, capture value from internet technologies, and streamline distribution."