Express Scripts Hints at Working With Amazon
On a recent earnings call, Express Scripts CEO Tim Wenworth hinted at a possible collaboration with Amazon.
In recent months, there have been rumblings that Amazon is gearing up to move into the pharmaceuticals distribution industry. It was recently revealed that the massive wholesale company was hiring health experts to help develop its pharmacy distribution business.
Amazon’s move into the pharmacy space seemed like it would disrupt the business of PBMs, given that most large PBMs, like Express Scripts, also operate mail delivery services. Amazon’s entrance into the PBM realm could also bring a higher expectation of price transparency, given the company’s customer-focused business model—a move that could prove problematic for PBMs that thrive on negotiating discounts without much transparency.
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However, Mr Wentworth explained during the call that there could be room for Express Scripts to assist Amazon with developing its pharmacy distribution business.
“So as I think about Amazon and what they may choose to do in pharmacy… which is, you know, becoming a PBM is a lot more than dispensing drugs,” he said. “If Amazon were looking to be an efficient provider in networks, we would welcome that opportunity.”
Some have speculated that Amazon may simply purchase Express Scripts to gain an instant foothold in the industry, similar to the company’s recent acquisition of Whole Foods Markers gave it an instant presence in the grocery industry. However, some experts say the value isn’t there for Amazon to make such an expensive acquisition.
“Amazon would need to pay a premium to acquire Express Scripts. For example, a 30% premium over its June 28 market value would amount to $50 billion,” Peter Cohan wrote in Forbes. “Although Express Scripts is trading 28% below its all-time July 2015 high of about $90, this seems like a lot to pay for a company with about $100 billion in revenue that has been shrinking at a 1.2% annual rate for the last 3 years.”
—David Costill
