6 ms·

A big chunk of the health care industry is the oligopoly of distributors. There's only 3 of them: McKesson, AmerisourceBergen and Cardinal. If Amazon can bring

by IBM 9y ago

A big chunk of the health care industry is the oligopoly of distributors. There's only 3 of them: McKesson, AmerisourceBergen and Cardinal. If Amazon can bring much needed competition to that part of the healthcare market it'd help bring prices down. CVS is moving up the stack because they're afraid of Amazon entering the industry. They're combining a retailer, PBM and now a health insurer. Personally I think it should be blocked because the last thing the health care industry needs is more concentration, but it will likely pass because of the nonsense (Bork-created) antitrust regime of the past 40 years.

pcurve 9y ago
Drug distributor is probably the easiest space for Amazon to get into, but it's not where the cost savings opportunities lie. Margin isn't very high in that space. In order for anti trust flag to be raised through vertical integration like this, the combined entity would need to start buying up other entities in the vertical chain. I'm actually interested in how this plays out.
- IBM 9y ago
  There's excessive concentration at every level of the health care industry. The top 3 PBMs have 80% of the market. Hospitals have consolidated. Doctors practices have consolidated. Consolidation begets consolidation as everyone seeks to increase their leverage over suppliers and customers. If Amazon is going to get into the pharmacy business they'll probably become a distributor as well since it's an outgrowth of the logistics they already do.
  - pcurve 9y ago
    "Hospitals have consolidated" Are you sure about this? Hospital and provider networks are probably the most fragmented layer in the healthcare vertical stack, by far. In the For Profit space, I would agree with you, top 3 dominates. But if you throw in non-profit into mix, their power gets really diluted. https://www.compassphs.com/blog/healthcare-trends/healthcare-fast-facts-top-30-largest-hospital-systems-in-america/ https://www.compassphs.com/blog/healthcare-trends/healthcare...
    - IBM 9y ago
      I was talking about the for-profit hospitals mainly but non-profit hospitals have been consolidating as well. In Massachusetts, a Partners HealthCare acquisition was blocked on antitrust grounds [1]. If other parts of the value chain are consolidating, everyone feels the need to consolidate. [1] https://www.bostonglobe.com/business/2015/01/29/partners/s9TxpYCBakjPN6pDbBFHGL/story.html https://www.bostonglobe.com/business/2015/01/29/partners/s9T...
conanbatt 9y ago
IF you want to disrupt the pharma market, just let drug importation go free, and instead of debating the effects of a one new player, see the effects of the entire world getting in on it.
- chimeracoder 9y ago
  > IF you want to disrupt the pharma market, just let drug importation go free, Yup. Allowing reimports of prescription drugs would be the single easiest way to have a massive effect on the costs of care in the US, with pretty much no negative impact on patients, providers, or pharmaceutical companies in the US.
  - Flammy 9y ago
    How would that not significantly harm the pharmaceutical companies? Don't they make a decent percentage of their revenue off of brands which are currently price protected via these tariffs?
    - sithadmin 9y ago
      >Don't they make a decent percentage of their revenue off of brands which are currently price protected via these tariffs? Yes. If consumers and/or pharmacies in the US could easily and reliably source cheaper brand-name drugs from international markets where price ceilings are in effect, it would ruin many drug companies, especially smaller ones.
      - chimeracoder 9y ago
        > Yes. If consumers and/or pharmacies in the US could easily and reliably source cheaper brand-name drugs from international markets where price ceilings are in effect, it would ruin many drug companies, especially smaller ones. Those price ceilings only exist because of the artificial trade barrier between the US and those other countries. Without that trade barrier, pharmaceutical companies would charge roughly equivalent prices in the US and other countries. It wouldn't ruin drug companies at all.
theklub 9y ago
What's interesting is there have been other Healthcare mergers that have gone under the radar. For example United buying a large physician group based in CT. So now you have an insurance company also providing the healthcare. This was a few years ago too... http://www.modernhealthcare.com/article/20151221/NEWS/151229995 http://www.modernhealthcare.com/article/20151221/NEWS/151229...

by IBM 9y ago

pcurve 9y ago

Drug distributor is probably the easiest space for Amazon to get into, but it's not where the cost savings opportunities lie. Margin isn't very high in that space. In order for anti trust flag to be raised through vertical integration like this, the combined entity would need to start buying up other entities in the vertical chain. I'm actually interested in how this plays out.

IBM 9y ago
There's excessive concentration at every level of the health care industry. The top 3 PBMs have 80% of the market. Hospitals have consolidated. Doctors practices have consolidated. Consolidation begets consolidation as everyone seeks to increase their leverage over suppliers and customers. If Amazon is going to get into the pharmacy business they'll probably become a distributor as well since it's an outgrowth of the logistics they already do.
- pcurve 9y ago
  "Hospitals have consolidated" Are you sure about this? Hospital and provider networks are probably the most fragmented layer in the healthcare vertical stack, by far. In the For Profit space, I would agree with you, top 3 dominates. But if you throw in non-profit into mix, their power gets really diluted. https://www.compassphs.com/blog/healthcare-trends/healthcare-fast-facts-top-30-largest-hospital-systems-in-america/ https://www.compassphs.com/blog/healthcare-trends/healthcare...
  - IBM 9y ago
    I was talking about the for-profit hospitals mainly but non-profit hospitals have been consolidating as well. In Massachusetts, a Partners HealthCare acquisition was blocked on antitrust grounds [1]. If other parts of the value chain are consolidating, everyone feels the need to consolidate. [1] https://www.bostonglobe.com/business/2015/01/29/partners/s9TxpYCBakjPN6pDbBFHGL/story.html https://www.bostonglobe.com/business/2015/01/29/partners/s9T...

conanbatt 9y ago

IF you want to disrupt the pharma market, just let drug importation go free, and instead of debating the effects of a one new player, see the effects of the entire world getting in on it.

chimeracoder 9y ago
> IF you want to disrupt the pharma market, just let drug importation go free, Yup. Allowing reimports of prescription drugs would be the single easiest way to have a massive effect on the costs of care in the US, with pretty much no negative impact on patients, providers, or pharmaceutical companies in the US.
- Flammy 9y ago
  How would that not significantly harm the pharmaceutical companies? Don't they make a decent percentage of their revenue off of brands which are currently price protected via these tariffs?
  - sithadmin 9y ago
    >Don't they make a decent percentage of their revenue off of brands which are currently price protected via these tariffs? Yes. If consumers and/or pharmacies in the US could easily and reliably source cheaper brand-name drugs from international markets where price ceilings are in effect, it would ruin many drug companies, especially smaller ones.
    - chimeracoder 9y ago
      > Yes. If consumers and/or pharmacies in the US could easily and reliably source cheaper brand-name drugs from international markets where price ceilings are in effect, it would ruin many drug companies, especially smaller ones. Those price ceilings only exist because of the artificial trade barrier between the US and those other countries. Without that trade barrier, pharmaceutical companies would charge roughly equivalent prices in the US and other countries. It wouldn't ruin drug companies at all.

theklub 9y ago

What's interesting is there have been other Healthcare mergers that have gone under the radar. For example United buying a large physician group based in CT. So now you have an insurance company also providing the healthcare. This was a few years ago too... http://www.modernhealthcare.com/article/20151221/NEWS/151229995 http://www.modernhealthcare.com/article/20151221/NEWS/151229...