What would happen if….
It’s astonishing to think that Facebook has passed the 2 billion user mark, that’s 2 BILLION people. Just to put that number in context the United States population is just under 324 MILLION, China’s the world’s largest country has a population of about 1.4 BILLION, so that means you could add the populations of these two countries and still NOT reach 2 billion people.
Although Amazon does not divulge their user base most analysts who follow the company believe they have almost 65 million Prime users worldwide. Google according to estimates has almost 1.2 BILLION users, while Apple is said to have almost 1 BILLION devices in the hands of users worldwide.
Yes, this is massive scale that’s obvious. What’s less obvious is what would happen if say Amazon made the deep way deep dive into diabetes. While we don’t see Amazon developing their own drugs or devices they can if they choose to do so blow up the entire diabetes supply chain model and seriously injure Walgreens and CVS just for good measure. The company is already partnered with Merck (NYSE: MRK) in diabetes and the two companies currently are holding a contest for app developers as they believe Alexa could become a diabetes coach.
Now just for grins and giggles think what would happen if Amazon not just turned Alexa into a patient coach but also had Alexa refill the patient’s prescriptions. Prescriptions which could be delivered right to the patient’s door therefore by-passing Walgreens and CVS. Not only would Walgreens and CVS loss the revenue generated by these script refills but also the ancillary revenue from impulse buys. We don’t want to overstate the obvious but there is a reason the pharmacy is in the back of the store.
In fact, we cannot think of one diabetes drug or device supply that cannot be sent directly to the patient. This is the exact model followed by Medtronic (NYSE: MDT) for their pump supplies, patients by-pass the pharmacy and have these supplies delivered directly to their doorstep. The impulse buys once made in the brick and mortar pharmacy retailer will merely be transferred to Amazon, they would become virtual impulse buys.
Such a bold move would also benefit the players in our wacky world as it should ultimately lower their costs by eliminating the middleman. Amazon would take the place of not just the retail pharmacy but also the distributors who fulfil these brick and mortar retailers. Amazon already has the infrastructure in place and knows a thing or two about fulfilment.
The company could also leave it to others, as they are doing with Merck, to come up with all the way cool whiz bang cloud enabled toys which communicate with Alexa. Like Apple we don’t believe Amazon wants to deal with the FDA. Also like Apple and Google they do not need to be in diabetes, but they will benefit from being in diabetes.
We also see several benefits to the patient especially those located in rural areas. Not only would this model save these patients time, not a renewable resource, it would provide them with access. Who says that the Amazon pharmacy cannot be manned by a virtual pharmacist who could chat with the patient. A chat which could be done on the patient’s smartphone either by text or FaceTime.
The best part and this why scale means everything Amazon would get a small cut of every transaction. Think about that just for a moment millions of transactions generated by millions of patients who have chronic disease for which there is no cure. A patient population which continues to grow at epidemic rates on a global basis.
Could they venture even deeper into the diabetes pool and earn additional revenue from managing patients with diabetes? Could they establish value-based contracts with payers? Heck with their scale and cash on hand what prevents them from going 100% at risk with payers and earn revenue downstream when they demonstrate they have taken cost out of the system. The good news for Amazon is they could do all of this and more. Even better they don’t need to do these things and they will still make gobs of money.
Perhaps the simplest way to look at this is think of the fee people pay to get cash from an ATM. Millions of transactions each day that generate billions in fee revenues. Same goes for companies which provide credit card processing services, millions of transactions which generate billions in revenues.
What would happen if…….. think about it.