Amazon could supercharge its biggest weapon by getting into healthcare

People are thinking a lot about what Amazon could do to the healthcare industry if it decided to get involved.
Should Amazon get into the business of prescription drugs, analysts at Morgan Stanley say that building pharmacies at Whole Foods could be a good way to get more Amazon Prime members who are over 55.
Building pharmacies in Whole Foods could also generate $2.3 billion in sales and help grow Amazon's Prime Now business.

People are starting to seriously think about what it might mean if Amazon were to get into the healthcare industry.

In a 70-page report released Monday, analysts at Morgan Stanley broke down all of the potential ways Amazon could get into the industry, at varying degrees of involvement.

"Amazon’s disruption of healthcare is a foregone conclusion," the analysts wrote. "Recent hires and public statements make it clear that Amazon is already moving into medical supply distribution."

If Amazon wanted to go all-in and get into the pharmacy business, especially by opening pharmacies at Whole Foods locations, it could be a major boost to Amazon Prime membership in one key demographic: People over 55.

"We note too that the older demographic still under-indexes toward Prime membership...which speaks to the opportunity for Pharma to help Amazon further penetrate the ~80 million 55+ population in the United States," Morgan Stanley analysts wrote in the note.

In particular, getting into the pharmacy business might be the right avenue to approach potential Prime members who are over 55 because they're already internet-savvy when it comes to finding cheaper prices or coupons to help them afford their medications.

Prime is a big advantage that Amazon has over other online retailers. According to survey data from RBC Capital Markets, more than half of the 2,200 people the group surveyed signed up for Amazon Prime, with more than half of that group spending more than $800 a year on Amazon.

Whole Foods doesn't have a pharmacy, though it does sell vitamins and supplements. Setting up pharmacies within Whole Foods could generate an estimated $2.3 billion of pharmacy sales within stores as well, Morgan Stanley analysts said, as well as drive Amazon's Prime Now business, which has free two-hour delivery.

"Offering this benefit of convenience will help it compete against traditional retail pharmacies and will provide yet another benefit to being a Prime member," the report said.

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