E-commerce giant Amazon’s foray into the health care market is gaining ground. Amazon now allows customers who buy medicines from them to use their flexible savings account or health savings account, often referred to as HSA or FSA, to get discounts.
These programs allow customers with health insurance to reduce their out-of-pocket expenses by setting aside a portion of their pre-tax income to cover medical expenses like prescription medicines.
The move is intelligent to stay relevant in a market where rivals like Walmart (WMT) already offer pharmacy services and also have a storefront for HSA and FSA products.
In the summer of 2018, Amazon has also acquired an internet pharmacy company, PillPack, gesturing an interest to add prescription medicines in its portfolio. But PillPack, which primarily serves to older customers who take multiple medications, hasn’t been fully integrated with Amazon yet.
Amazon’s current interest in the prescription drugs market will not be without challenges owing to the complex web of intermediaries that sit between the drug manufacturer and the pharmacy. The company will now have to work closely with middlemen, known as pharmacy benefits managers, in order to take a customer’s insurance.
Amazon’s foray into the healthcare market was suspected due to the large segment of customers that pay put-of-pocket for their medical expenses. That’s about 6% of the U.S. population, which is a chunk of the $450 billion pharmacy market. Tapping this segment marks Amazon’s first move into the medicine market.