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Amazon to regulators: We won't use state licenses to sell prescription drugs

Amazon will not use pharmacy licenses it obtained from Tennessee and Indiana to sell prescriptions, but will use them to sell medical devicves and supplies instead, the company has told regulators.

Amazon has kept mum about its ambitions in health care, despite reports that it's exploring getting into the prescription drug business. But it has been quietly talking to regulators.

Analysts from the investment firm Jefferies uncovered correspondence between the company and regulators in Tennessee and Indiana. Excerpts from these documents, which Jefferies obtained in a Freedom of Information Act request, show that Amazon intends to sell medical devices and supplies in its Indiana fulfillment center, but would not be storing or distributing prescription drugs.

"Applicant (Amazon) will not store or ship drugs," the application clearly states.

That said, most industry experts aren't ruling out the possibility of Amazon entering the prescription drug market. Instead, they maintain that it's a matter of if -- and not when.

"There has been a massive overreaction to the Amazon threat, said Adam Fein, president of Pembroke Consulting and a drug supply chain expert, to CNBC.

"I would never underestimate Amazon," he continued. "But I remain somewhat skeptical of Amazon's ability and desire to fundamentally alter the drug channel (as) the incumbents will have many opportunities to defend their position, capture value from internet technologies, and streamline distribution."

Jefferies analysts stress that Amazon could navigate the complexities of the prescription drug space, but that it will be likely to disrupt some lower-hanging fruit first. And that includes selling medical supplies, such as surgical equipment and devices. That would be a more immediate threat to medical distribution companies, like McKesson and Cardinal Health, rather than to pharmacies and pharmacy benefits managers.

Amazon is expected to make a decision about whether it will get into the prescription drug business in the coming weeks.


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