Amazon Takes Another Step into the Healthcare Arena

Amazon's newest offering sweetens the deal for Prime members.

When it comes to drug prices, America leads the way.

Americans pay more for prescription drugs than anyone else in the world, with average costs of about $1,300 per person, according to the Organization for Economic Co-operation and Development.

A study by the Kaiser Family Foundation found that 83% of the respondents believed the cost of prescriptions was unreasonable, but most of them said affording their prescriptions was easy.

However, people who take four or more prescription drugs, those with chronic conditions in their households, and those with an annual household income of less than $40,000 were more likely to report difficulty affording medication, the survey said.

Amazon's Latest Move In Healthcare

Rising prices have set the stage for competition and Amazon  (AMZN) - Get Free Report has taken another step into the fray with a subscription plan for U.S. customers that offers a range of generic drugs through at-home delivery.

The $5 per month plan, called RxPass, will include more than 50 mediations covering illness ranging from diabetes to high blood pressure. 

 The fee would come on top of a standard $139 per year Amazon Prime membership.

Amazon estimated that more than 150 million people take one or more of the medications available through the RxPass program. 

Customers enrolled in Medicare, Medicaid or any other government healthcare program will not be able to enroll in Amazon Pharmacy's RxPass service.

This not the online retailer's first venture into healthcare. In October 2020, the company launched Amazon Pharmacy and an Amazon Prime prescription discount benefit. 

In August, Amazon said it would shut down its telehealth service, Amazon Care, on Dec. 31.

Senior vice president of health services Neil Lindsay said in an email to employees that it was "not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”

Analyst Calls RxPass 'Very Compelling Offer'

In November, the company introduced Amazon Clinic, a virtual health service that will operate in 32 states and provide virtual care for more than 20 common health conditions.

In July, Amazon bought One Medical  (ONEM) - Get Free Report for $3.9 billion as a way for Amazon to move into the primary care industry as healthcare costs have risen exponentially.

The One Medical purchase followed Amazon's 2018 acquisition of PillPack, an online pharmacy that delivers medication.

Citi analyst Daniel Grosslight said in a research note that RxPass will be a "very compelling offering" for the roughly 30% of Americans who take two or more drugs. 

RxPass will pressure GoodRx Gold membership, the analyst said, which recently raised its price to $9.99 per month, though GoodRx Gold provides additional benefits such as telehealth visits for $19 compared with $35 at Amazon.

Grosslight said he thinks GoodRx will need to accelerate the pace of product innovation to fend off the "credible" threat from Amazon.

The drive into healthcare comes as Amazon plans to trim thousands of workers, focused largely on Amazon Stores and its PXT organization, amid what it called an "uncertain and difficult" global economy.