How Amazon will wreck the pharmacy industry

How Amazon will wreck the pharmacy business

Amazon quietly entered the pharmacy business in 2017 and introduced PillPack, a direct to home prescription drug business that packages pills by daily dosage, with dates and times to take the medicine printed on the package. The retail pharmacy heavyweights currently play middle man by negotiating discounts from drug makers for large health insurers, creating special pricing for insurance networks. By selling directly to insurance companies, Amazon will cut out the retail pharmacy giants. CNBC

dis-rup-shun: Amazon’s disruptive move will benefit the consumer with lower drug prices and, possibly, lower health insurance premiums, but will destabilize the retail pharmacy industry by forcing it to rely more heavily on the sale of non-drug products, a battle it is already fighting against Amazon.com and Prime. One answer is for retail pharmacies to move more aggressively into care clinics, a trend well underway, putting further pressure on doctor and hospital chains to become more consumer-friendly as they are forced to compete with retail pharmacies for walk-in healthcare.

Direct share offerings will put a squeeze on bankers

Collaboration tool vendor Slack went public this week without assistance from investment banks, gaining 50% value in its first day. The capital raise puts valuation of the company at $23.1 billion. Compare this to Uber’s IPO last month which, by absolute dollar valuation, was the worst performing IPO in history. Both Lyft and Uber have recovered somewhat from a bad initial offering. Gizmodo

dis-rup-shun: Two large IPOs, Slack and Spotify in 2018, were direct (limited banker involvement) offerings. Both companies have enjoyed strong value growth since IPO. Uber and Lyft were heavily hyped by investment banks and crashed after offering. Before we conclude that bankers are bad, it is important to note that Uber and Lyft’s business models do not show profitability in the near term, and seem to be in multiple businesses. On the other hand, Slack is facing stiff competition from tech giants. If we assume that the market is sophisticated enough to understand the competitive landscape ahead of the IPO, then one conclusion is that bankers may be over-promoting offerings and that a more informed market later corrects. Expect direct offerings to become more commonplace, eventually forcing a correction in the fees charged by banking firms.

Zuckerberg outranks Tim Cook

Glassdoor’s anonymous survey of former employees’ views on their CEO has a number of tech CEOs ranking in the top 10. Ranking in the lower half of the 100 ranked are Facebook’s Zuckerberg at 59 (#1 is the best) and Apple’s Tim Cook at 69th place. ZDNet

dis-rup-shun: Interesting to see Cook at the bottom of the heap, especially after a brutal year for Facebook’s public image. Does the secrecy inherent in Apple’s culture create distrust inside the family? Despite Facebook’s missteps, Zuckerberg has been quite penitent in public, perhaps gaining employee’s respect. It is rare for a company as successful as Apple to not become an arrogant empire, and perhaps more transparency would engender more employee admiration.

Netflix will eventually include advertisements, says industry

Netflix, with its 150 million subscribers, faces significant costs from developing original content. Industry insiders predict that Netflix will break its vow of no advertisements as production costs increase and the value of its audience reach soars. CNBC

dis-rup-shun: Netflix continues to pursue a unique strategy — using debt to finance a very large catalog of original content that it can monetize over coming years. As other streaming services are launched from companies including Disney and AT&T’s WarnerMedia, Netflix subscriber growth will be challenged. The barriers to entry for streaming services have become original content — a very expensive barrier. As John Penney, CSO of 29th Century Fox has been telling the industry for years, there is simply not enough non-movie theater revenue in the TV distribution chain to support the costs of original content. The company’s stock price, however, continues to show confidence in the company’s ‘think different’ strategy.

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