Dr. Amazon Puts GoodRx Shares in the ER
Amazon’s new pharmacy offering is sending a crippling blow to incumbent players in the U.S. retail drug business as the tech giant makes the biggest push into healthcare since its PillPack acquisition in 2018. Companies such as GoodRx, CVS, Walgreens, and Rite Aid saw a combined $20 billion in market cap disappear in reaction to the news, according to Jefferies analyst Brent Thill.
Paging Dr. Amazon: There are two key pieces to the Amazon Pharmacy launch. First, Amazon Pharmacy will let customers order prescription meds, have them delivered straight to their door, add their insurance information, and give Prime members free two-day delivery. The second part is the Prescription Savings Card, which gives Prime members without insurance access to savings of up to 80% on generics and up to 40% on branded medications. 10% of the U.S. population is without insurance.
“We believe today's announcement represents a substantial acceleration for AMZN in healthcare, and see entrance into telemedicine and telehealth as next on the list,” said Jefferies analyst Brent Thill.
What it means for GoodRX: The company that took the biggest hit, and is perhaps the most vulnerable to Amazon’s entrance into the drug-slinging game, is GoodRx, which is a digital healthcare platform offering price comparisons for prescription drugs and access to medication savings programs. While the narrative might be an overhang for GoodRx stock, Raymond James analyst Aaron Kessler says he is staying “positive on fundamentals for its core prescription business as well as newer businesses (subscriptions, pharma solutions, telehealth).” Kessler also says he is not concerned about Amazon capturing a significant share with its savings card, citing several reasons:
GoodRx is easier to get started than Amazon Pharmacy.
GoodRx pricing is likely to be more competitive with its 10+ pricing feeds, compared to one for Amazon.
Recent survey by Raymond James signals ~80% brand awareness for GoodRx.
David vs. Goliath: Even though GoodRx is an incumbent, Amazon’s 80 million Prime subscribers dwarfs the ~5 million subscribers that GoodRx has. UBS analyst Eric Sheridan acknowledges that the competitive threat from Amazon is worth monitoring, but echoes the sentiment that GoodRx has a good shot at delivering better pricing and emphasizes GoodRx’s relationship with retailers as an advantage because Amazon “will likely face more pushback from retailers that are reluctant of enabling AMZN's expansion into another category.” Sheridan adds:
“GoodRx is able to drive incremental foot traffic for retailers given the incremental volume they are driving within the overall healthcare ecosystem. Conversely, Amazon’s business model takes share from these retailers, which could potentially result in more pushback from retailers as participation with InsideRx could grow Amazon as a more significant competitor to them.”
