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Amazon telegraphs the next step in pharmacies

Jeff Bezos famously remarked once that “Your margin is my opportunity”–meaning that Amazon will relentlessly target high-margin businesses as its means to expand. It started with books, a famously inefficient business where retailers could return unsold books for full price months after accepting shipments. Amazon moved to just about any other form of shippable retail product before turning to the high-margin technology industry with cloud computing, and then entertainment with video streaming.

But Amazon must keep conquering new industries to maintain its breakneck growth pace. FedEx is looking over its shoulder waiting for Amazon to get into the shipping business. CVS got that memo, which is why CVS acquired Aetna last year.

The shoe for CVS dropped recently when Amazon acquired PillPack. There is all sorts of speculation around how that might work out. Some think that Whole Foods chains might start offering pharmacy services. Others think Amazon wants to re-engineer the health care experience. There is a wide gap between those two ideas and maybe they are both accurate. The easiest way for Amazon to start would just be to start offering PillPack services online (Amazon Pharmacy?) while clearing all the regulatory and insurance hurdles to do more.

If Amazon does intend to re-engineer health care, it could scarcely choose an industry with higher margins or a lousier customer experience–at least in the US. And it is hard to argue with the acquisition of PillPack as the place for Amazon to start. PillPack has taken a small step of re-engineering medications, by packaging each dosage separately, delivering the medication to your house, and making refills painless. It plays to Amazon’s strengths in online delivery and improved customer experience.

Walmart has already focused on low-priced medication as its way into health care. CVS is diversifying from its pharmacy roots to urgent care (with Minute Clinic) and health insurance (with its Aetna acquisition). Don’t expect Walgreens and Rite Aid to sit still, even if they merely become acquisitions to the bigger players lining up to take the field against each other. But there are still many players not heard from yet, ranging from hospital systems, to pharmaceutical companies, to health insurers. And there is always the wild card of changes to US regulations that could go anywhere from a repeal of Obamacare to a move to a single-payer system to anything in between.

Buckle up, it should be a wild ride.

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Mike Moran

Mike Moran is an expert in internet marketing, search technology, social media, text analytics, web personalization, and web metrics, who, as a Certified Speaking Professional, regularly makes speaking appearances. Mike’s previous appearances include keynote speaking appearances worldwide. Mike serves as a senior strategist for Converseon, an AI powered consumer intelligence technology and consulting firm. He is also a senior strategist for SoloSegment, a marketing automation software solutions and services firm. Mike also serves as a member of the Board of Directors of SEMPO. Mike spent 30 years at IBM, rising to Distinguished Engineer, an executive-level technical position. Mike held various roles in his IBM career, including eight years at IBM’s customer-facing website, ibm.com, most recently as the Manager of ibm.com Web Experience, where he led 65 information architects, web designers, webmasters, programmers, and technical architects around the world. Mike's newest book is Outside-In Marketing with world-renowned author James Mathewson. He is co-author of the best-selling Search Engine Marketing, Inc. (with fellow search marketing expert Bill Hunt), now in its Third Edition. Mike is also the author of the acclaimed internet marketing book, Do It Wrong Quickly: How the Web Changes the Old Marketing Rules, named one of best business books of 2007 by the Miami Herald. Mike founded and writes for Biznology® and writes regularly for other blogs. In addition to Mike’s broad technical background, he holds an Advanced Certificate in Market Management Practice from the Royal UK Charter Institute of Marketing and is a Visiting Lecturer at the University of Virginia’s Darden School of Business. He also teaches at Rutgers Business School. He is a Senior Fellow at the Society for New Communications Research. Mike worked at ibm.com from 1998 through 2006, pioneering IBM’s successful search marketing program. IBM’s website of over two million pages was a classic “big company” website that has traditionally been difficult to optimize for search marketing. Mike, working with Bill Hunt, developed a strategy for search engine marketing that works for any business, large or small. Moran and Hunt spearheaded IBM’s content improvement that has resulted in dramatic gains in traffic from Google and other internet portals.

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