Walgreens CEO Not Worried About Amazon Just Yet

Bruce Japsen ,

 

 

The nation’s largest drugstore chain doesn’t expect to see online retailer Amazon jump into the pharmacy business anytime soon, given the complexity of the prescription and healthcare industry.
Responding to recent reports that Amazon is looking to get into the pharmacy business, Walgreens CEO Stefano Pessina seemed to caution about any such new rival. He made his comments about the online retail giant the same day Walgreens Boots Alliance WBA -0.54% said it would buy 2,186 Rite Aid RAD -8.65% stores for $5.2 billion to become an even bigger brick-and-mortar drugstore chain.

“Honestly, I don’t believe that Amazon will be interested in the near future...in this market,” Walgreens CEO Pessina told analysts Thursday on the company’s third-quarter earnings call. “They have so many opportunities around the world in many other categories, which are much, much simpler than healthcare, which is very regulated business.”

 

To be sure, Amazon less than two weeks ago announced plans to spend $13.7 billion to buy brick-and-mortar grocery chain Whole Foods Market WFM +0.01%, which operates in a seemingly less complicated environment than healthcare.
Any competition from Amazon comes at a time Walgreens and CVS Health CVS -0.24% are forming closer ties with government and private health insurers and employers looking at better ways to coordinate the delivery of medical care.

 

The trend in healthcare is toward value-based models and population health that require pharmacies to have relationships with doctors and other providers in the community that have existed for decades. And it’s the physicians in the health plan networks who write the prescriptions that Amazon would need to become a pharmacy growth story.

“They are a good team and a very rational team…[but] this will not be their priority,” Pessina said of Amazon management.

Some argue Amazon could make some inroads by getting into mail-order pharmacy. Walgreens made no comment on any potential Amazon could have in any aspect of the pharmacy business, but wouldn’t rule out a future partnership.

“We could find our goal in the new environment and we wouldn’t exclude to partner with them,” Walgreens' Pessina added. “We wouldn’t exclude to analyze the new situation of the market and to find our place adapting ourselves.”