Tech is a game changer and huge disruptor to existing business models, just ask any London cabby about Uber for a colourful explanation. Combine that with a sector like healthcare where there is a customer base with a need for your product, high repeat income and high regulation, and you have a very attractive business model - one that most corporates would be willing to acquire or make a significant investment to access.
Technological innovators in the healthcare sector have already made great headway. Among these is "Pharmacy2U", now the UK's largest online pharmacy. Its online model is driving business away from traditional high street pharmacies, a sector which is not highly profitable and is going through government funding cuts this year.
Pharmacy2U is increasing market share by "offering a new kind of pharmacy experience which saves ... patients time and money. Our NHS repeat prescription services saves our patients £147 a year .. [and] 3.5 hours each month. Switching to our repeat prescription service also saves the NHS between 16% to 29% in medication and dispensing costs compared to traditional dispensing methods." What's not to like?
Pharmacy2U has shown impressive growth, but even as the UK’s largest online pharmacy it is only achieving revenues of £17m a year, a drop in the ocean compared to larger players like Boots UK (£6.8bn) and smaller independent chains such as Day Lewis (£382m). There’s plenty left to go for - over 60% of prescription items go to individuals aged over 60 and the majority of spend is on chronic conditions requiring a repeat prescription, the most desirable income stream in the “business to consumer” part of this space.
Pharmacy2U has achieved its growth as a start up; if Amazon is to launch into the market with its already established brand name, customer base, reputation and significant capital, or acquires an established player, it is likely to generate significant returns and cause some major disruption. Given the specialism Amazon already has in the online business to consumer space, it's likely to target the prescription delivery end of the market, bringing high quality repeat customers and competing directly with the established pharmacy chains. Steffano Pessina, Walgreens' CEO, might hope, or truly believe, Amazon won't move into this space - but the right acquisition could bring a supercharged new competitor his way imminently.
Walgreens CEO Doesn't See Amazon As A Rival Without A Major Acquisition