By RYAN MARLING

How Amazon can position itself as the pharmacy of the future

We know Amazon has a knack for disruption—over the years it has upended countless brick and mortar bookstores and other major players in the retail industry. The e-commerce behemoth may be at it again, making headlines for its interest in breaking into the pharmacy market in the United States. But delivery of prescription medications to the home already exists for patients with chronic and even acute conditions, while patient portals already give patients online access to payments and prescription refills. So how might we expect Amazon to set itself apart from the competition and grow in the pharmacy space? If it stays true to the tenets of Disruptive Innovation, expect it to further expand its capabilities around healthcare in the home—just as it has kept book, grocery, and other retail shoppers at home over the years.

The principles of disruption

The Theory of Disruptive Innovation is widely acknowledged as a theory of competitive advantage brought forward by Clayton Christensen in his book The Innovator’s Dilemma. Its creation was in response to many well-run and successful companies faltering despite making, seemingly, all of the correct management decisions. After studying numerous cases Professor Christensen found that disruption stemmed from companies improving their offerings to an extent that they overshoot mainstream consumers’ demands for performance—often in pursuit of catering to their most demanding and profitable customers. Disruptive entrants capitalize upon this to reach less demanding and mainstream markets by bringing to market solutions that cost less and are more simple and convenient to use—often selling a product considered “inferior” in terms of traditional performance standards.

Amazon’s medication delivery program is not likely to be able to make an impact in the pharmacy industry on its own. Mail order pharmacies have been around for decades, and in many cases drug delivery may actually be less convenient than just picking up a prescription in person, as many pharmacies are co-located at the point of care. Amazon will instead have to find a way to reach less competitive markets, neglected by their existing competition, with its option of drug delivery. It can do this by hitching a ride with another disruptive technology that is already reaching previously neglected populations with convenient access to care.

Riding the coattails of telemedicine

Telemedicine (the use of telecommunications technology to evaluate, diagnose and/or treat patients in remote locations) holds promise for Amazon as an entrypoint into the pharmacy market, and as a vehicle to carry the company upmarket. Virtual visits have improved access to professional medical expertise in areas where the nearest doctor’s office may be over 40 minutes away, and in urban areas where the nearest appointment slot to see the doctor located down the road may be multiple days. For these reasons, along with the convenience of care at home, telemedicine is rapidly growing in use and is becoming more frequently turned to for acute and chronic care cases. In fact, Kaiser Permanente’s CEO Bernard J. Tyson recently revealed that, last year, over half of Kaiser’s patient visits were conducted via online portals, virtual visits, or the health system’s apps.

Amazon’s e-commerce platform can capitalize on the growth of telemedicine by finding ways to seamlessly integrate the process of ordering prescription drugs from its website into the virtual visit experience of major telemedicine vendors. By doing this, the common workaround of the physician having to find a pharmacy near the patient to send in the prescription can be overcome. Instead, the familiar Amazon checkout process can be used to approve the order sale and delivery of prescription medication directly to the patient. From the perspective of the sick patient, being allowed to opt-in to medication delivery prevents needing to leave the home to pick up the prescription, improving the patient experience for many illnesses.

Reach underserved markets with an innovative business model

Telemedicine is an attractive option for patients when they cannot see their provider in-person within a convenient timeframe. But, as the Theory of Disruptive Innovation would suggest, in order for patients to turn to telemedicine, they must still believe that virtual visit technology is “good and reliable enough” to meet their needs before they give in to the convenience. Right now, use of telemedicine technology is limited to only certain, routine and less demanding, patient care cases because of this performance-convenience tradeoff. As telemedicine technologies improve over time and become “good and reliable enough” for more complex and demanding patient cases, usage will increase beyond markets lacking adequate access to care and more patients will confidently opt for their convenience. Because of this, those pharmacies that are well equipped to integrate their online ordering process into the virtual visit processes of the major telemedicine vendors will hold an important advantage.

By integrating its medication delivery services into the virtual visit process of major telemedicine vendors, Amazon can first make its online pharmacy easily available in markets where patients lack convenient access to care or a pharmacy. In this way, Amazon can avoid direct competition with established pharmacy competitors who tend to concentrate in wealthy areas, and improve its odds for early success. Over time, as telemedicine capabilities improve and advance upmarket, Amazon’s medication delivery option will reach more patients, and become more and more attractive as the delivery speed of Amazon and affiliates improve.

Influencing care in the home

Healthcare is increasingly adopting new payment models that shift financial risk upon providers to manage the costs of patient care. This additional risk has compelled providers to find ways to improve medication and regimen compliance among patients. In many ways, Amazon is already building the capabilities that providers seek—to influence personal behavior and consumer habits outside the doctor’s office. Its new personal assistant technology Alexa, for example, may be able to remind patients to take their medication, send an order to refill a prescription, or assist in scheduling a telemedicine appointment all by voice command in the home (see Alexa diabetes challenge). These additional experiences could be included with an order from the online pharmacy, and hold potential to make monitoring and compliance easier for patients with chronic conditions. In this way, Amazon can keep patients healthier and providers happier, and improve the likelihood they turn to Amazon in the future.

Telemedicine has already made progress in reaching new and neglected markets with convenient care options. Amazon can stake its claim as the pharmacy of choice for providers and patients engaging in virtual healthcare at home, and grow alongside the booming technology that is disrupting in-person patient care as we speak. To do this, the e-commerce powerhouse will have to successfully integrate ordering and checkout from its pharmacy into as many telemedicine processes as possible, and continue its progress in influencing consumer behavior at home. If Amazon can accomplish this, it will be set to break into the pharmacy space in a big way, just as it has changed the face of numerous other industries.

Ryan Marling is a research associate at the Clayton Christensen Institute for Disruptive Innovation.