A Pharmaceutical Phenomenon: Amazon considers the launch of pharmacy initiative in the UK

January 17, 2021

3 min read

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What's going on here?

Amazon is considering diversifying its market share even further as emerging speculation suggests that the online giant plans to extend its pharmacy business to the UK.

What does this mean?

Amazon’s pharmacy business, Amazon Pharmacy, launched in the US in November 2020. The US service enables customers to buy pharmaceutical goods on Amazon with discounts of up to 80% and guaranteed two-day free delivery for Prime members.

 Amazon has found a lucrative inroad into pharmacy since the service can do what many other pharmaceutical businesses cannot. Dispensing prescriptions over the Amazon service can be done in as little as a day, while British chains including Boots and Lloyds Pharmacy are unable to dispense with such short notice. Therefore, Amazon’s offering would allow it to compete in the UK for transactions based on speed and convenience. This is something which would not only be appealing to those on repeat prescription drugs, but also to GP surgeries who may be able to provide patients with a solution to slower, unautomated pharmacy chains.

 In the US, pharmaceutical drug prices are not regulated, meaning Amazon can offer lower prices which gives it a competitive edge over companies such as Walmart which have leveraged market power for a long time. Meanwhile, the edge that Amazon is seeking to obtain in the UK is ironing out the inefficient supply chain in the pharmaceutical industry, by making it easier for consumers to access yet another line of goods.

What's the big picture effect?

This story is highly prevalent in the growing age of digital services. Most notably, efforts to extend Amazon Pharmacy to the UK would further increase Amazon’s revenues and shave off more capital to the Digital Services Tax, which has been in force against revenues deriving from social media services, search engines and online marketplaces since April 2020. Currently, liability for the tax requires the company in question to achieve worldwide revenues of more than £500m, and a further £25m if they are operating in the UK.  Amazon Pharmacy would only exacerbate Amazon’s taxable revenue and potentially bring the company under further regulatory scrutiny for anticompetitive practices. However, it could be worth noting that Amazon would be filling a gap in the market where demand for medication at speed has been neglected. This would give the competition regulators something to chat about since there is not yet a comparable service in the UK.  

 More recently, Amazon has been entering the tech space with increased ferocity to improve consumer services. The company introduced Amazon Halo in December 2020, a wearable device that builds a 3D image of the consumer to promote health and wellbeing by analysing, among other things, body composition, sleep and movement. It is worth noting that if Amazon Pharmacy launches in the UK, the device could soon be used as a reactive device to support patients with their healthcare needs by offering recommendations of medication and health supplements. Such support would certainly increase Amazon’s consumer base in healthcare and may even increase revenues on its other AI services such as Alexa, which already has the capacity to place orders.

 With the pharmaceutical industry plagued with risks, Amazon may have found another piece for its vast retail network. It certainly has the scale to bring Amazon Pharmacy to the UK, which in turn is sure to be the final blow for smaller businesses, especially with the prospect of expanding into clinician services. It is therefore unlikely to be long until we see Amazon taking another slice of the UK retail sector, and hopefully one which will reduce the risk of delays and service dissatisfaction among the industry’s biggest consumers.

Report written by Evangeline Taylor 

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