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Amazon is Not a Healthcare Company

(C) Reuters.

By Christiana Sciaudone — It’s one thing to fill prescriptions. It’s another to provide healthcare. (NASDAQ:AMZN) announced this week that it’s getting into the pharmacy business, news that prompted a sell-off in drug store companies from the traditional players like CVS to newcomers like GoodRx. Not everyone’s convinced the online behemoth will so completely take over the business, however. The co-chief executive officer of online start-up Honeybee Health made the distinction between what a pharmacy is meant to provide and what Amazon Pharmacy is likely to offer.

“What they are known for is logistics and packages; that’s very different than what healthcare is,” said Jessica Nouhavandi, also a co-founder and, perhaps most importantly, a pharmacist. “Healthcare requires a level of detail to people, not packages.”

It’s no surprise Amazon wants to get into the pharmaceuticals business. Americans spent $485 billion on drugs in 2018, and are expected to dish out up to $655 billion in 2023. That would represent growth of 35%, according to the Pharmaceutical Commerce news site. U.S. pharmaceutical sales represent 40% of the global total, the biggest by far, with China’s 11% share putting it in second place, according to Statista.

Why do Americans spend more than any other country on drugs? Unlike elsewhere, there is no regulation on prices and any drug proven to be safe can be brought to market. U.S. consumers also tend to use health insurance when obtaining medications, which depend upon pharmacy benefit managers to manage prescription drug benefits and negotiate with manufacturers on their behalf — a middleman, if you will. It’s clearly a complicated and costly process, full of intermediaries along the way between you and your drugs.

Nouhavandi, who started out as a small-town pharmacist, along with her colleague Peter Wang, saw that process up close, and the high costs associated with it.

“We realized we weren’t telling patients the truth about how inexpensive the medications actually were,” Nouhavandi said in a phone interview this week. Insurance companies bound them to only tell them copay price, and not the cost if they bought outright, often a much cheaper option. Nouhavandi saw patients walking away empty-handed when they couldn’t afford the copay.

Wang provides a vivid example on his LinkedIn (NYSE:LNKD) page of a patient dropping off a prescription for a standard cholesterol medication. Wang submitted the claim to the insurance company, and told the patient his copay for the generic medication was $90.19. What he couldn’t tell him was the actual cost of those pills: $2.31.

“You don’t need insurance to buy generic, and you save more buying out of pocket,” Nouhavandi said. Honeybee, founded in 2017, started taking off last year. The company provides 6,000 generic medications, and for the 50 most popular medications, consumers can choose their manufacturer.

The company works directly with drug manufacturers, providing multiple generic options at low prices.

“It’s our mission to provide transparent pricing and choice,” Nouhavandi said, “without so many hands in the pot raising the price.”

Honeybee, which is based in Los Angeles, also provides the option to speak with a pharmacist as it aims to recreate the in-person experience as much as possible.

The company has raised $10 million in funding, and aims for another raise in 2021. Revenue should grow by four times this year, though Nouhavandi declined to give further details. And while there are other competitors, Nouhavandi points out that she and her partners are pharmacists and not Silicon Valley tech bros.

“When it comes to pharmacy and comes to health, it’s all about making sure you’re there to listen to the concerns,” she said. People come first, as does the safety of their information, and Honeybee does not traffic in data.

It’s not been an easy ride, said Nouhavandi, who never pictured herself as the CEO of a venture-backed company.

“I didn’t come up with this because I thought it would make money,” Nouhavandi said. “I did this because I have to. This is the oath I took and this is what’s right for people.”

While she hopes Amazon does the right thing for patients, she points to the fact that it’s doing the same thing as everyone else.

“The news of this launch, as big as they are and as powerful as they are, it was honestly disappointing,” Nouhavandi said. “They’re not really innovating for patients or providing more transparency around price. That’s what we aim to do.”

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