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CVS is expanding its same-day home drug delivery service nationwide, underscoring the retail giant’s sense of urgency to shore up against Amazon’s foray into pharmaceuticals.
Business Insider Intelligence
CVS and peers like Walgreens have revamped their services following Amazon’s $1 billion acquisition of online pharmacy PillPack — a clear threat to US retail pharmacies.
Here’s what it means: CVS’ move to tack on new delivery services is just the most recent attempt to sustain its consumer base and protect against Amazon.
- CVS’ $70 billion acquisition of US insurer Aetna was a reaction to Amazon encroaching on the space. Merging with Aetna granted CVS the capacity to bring consumers an accessible, integrated care journey across Aetna’s health plan and to fortify its pharmacy business. While CVS didn’t explicitly pin Amazon’s looming presence as a motivator for the deal, Aetna and CVS met several times prior to the merger with Amazon’s potential competition in mind, per Engadget.
- CVS unveiled a prescription membership service just months after Amazon scooped up PillPack. Dubbed CarePass, the service looks similar to what Amazon’s expected to eventually offer through its purchase of online pharmacy PillPack and is likely designed to preempt Amazon’s move into the space.
- And CVS has invested heavily in telemedicine, which could drive business to CVS’ in-store business. CVS partnered with telehealth provider Teladoc to make telemedicine visits available in its mobile app to consumers in nine states. The service both broadens CVS’ addressable market and could help CVS bolster its prescription sales via virtual providers prescribing medications.
The bigger picture: Despite CVS’ sweeping efforts, it’s likely Amazon will eventually win over CVS’ customers and steal a significant chunk of the prescription drug market.
- The majority of CVS customers say they’d ditch CVS in favor of an Amazon-run pharmacy. In an informal survey of Business Insider readers, Business Insider Intelligence found that nearly 70% of consumers who use CVS as their current pharmacy would switch to an Amazon pharmacy service if given the chance. The data isn’t representative of the general population — Business Insider readers tend to be younger, male, and tech-savvy — but we think the data provides a strong indicator that CVS could see a significant drop in revenue once Amazon rolls out a pharmacy service.
- And Amazon could likely woo even more customers by undercutting CVS’ prescription delivery service. CVS currently charges $8 dollars for same-day delivery, and $4.99 for one- or two-day delivery, per CNBC. Meanwhile, Amazon — which counted 101 million Amazon US Prime subscribers as of Q4 2018 — already offers two-day delivery of its line of over-the-counter meds at no cost. If Amazon integrates PillPack with its bustling e-commerce site, Amazon could attract additional CVS consumers eager for the convenience and cheaper delivery service.
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See Also:
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- UnitedHealthcare and the AMA are developing new billing codes for social determinants of health
Source: Business Insider – zlarock@businessinsider.com (Zoë LaRock)