Is Amazon Healthy for Healthcare Retail?

If any industry is ripe for disruption, it’s healthcare. With the prices ever-rising and legislative debates that haven’t done much to mitigate cost, there’s a lot of frustration and room for improvement on all sides. Many big names have been moving into the space lately to lay the groundwork for change. 

The list of ventures, hires, acquisitions, and product developments that Amazon has made in healthcare is exhaustive and nascent enough that it’s hard to know whether they will pan out. One thing is for sure: with the infrastructure of data and delivery that Amazon already has in place, they will certainly be able to alleviate some of the pain points in healthcare retail. Brands who do not have the right strategies in place to compete on Amazon risk losing out.  

In March, Amazon announced that they accept Flexible Spending Accounts and Health Savings Accounts (FSA/HSA). HSAs and FSAs are tax-free accounts that individuals with health insurance can contribute to in order to save on the cost of medical care, and they have become increasingly more relevant and helpful for individuals who are looking to reduce their medical costs. An estimated 63MM Americans have either an FSA or HSA. Amazon has removed a barrier to purchase — while unlocking an additional source of payment — for a huge number of customers.  

Eligible items are listed in a dedicated storefront, with thousands of products now available (a full list is here). Many brick and mortar retailers already have dedicated online storefronts for FSA/HSA eligible products, but Amazon’s new addition should be worrisome. Though Amazon is not yet a go-to source for drugstore products, their loyal consumer base and convenient online platform could quickly snatch up FSA/HSA dollars from customers who are already turning to Amazon for regular shopping. Additionally, due to the quality of traffic they receive online, Amazon is already leading in organic search rankings. 

Amazon has simultaneously been rolling out their own private label brands in the over-the-counter space. Basic Care offers generic OTC medications. A second brand called Solimo features a variety of wellness products, many of which are available alongside the OTC products in the new storefront. Brands should keep an eye on Amazon’s Private Label lines, which appeal to the FSA/HSA customer who is more conscious of price and eligibility. 

Amazon will likely bump up advertising efforts on their eligible products as the year comes to an end and FSA accounts get closer to expiration. To stay ahead of this, brands should have eligible products available on the Amazon marketplace as a defense strategy. If competitors become eligible first, it could influence purchases at shelf. Amazon worked with some brands to populate the storefront before launch, but others should be proactive going forward to ensure their products are listed for eligibility or they risk missing out on the boost from early sales. 

Integrating healthcare purchases into their carts will likely be a natural move for the 100MM+ Prime subscribers. FSA/HSA card numbers can be securely stored like other credit card information, which removes the need to submit receipts. Amazon has even removed the step of a separate transaction by allowing for two debit or credit cards to be processed within one purchase, so customers can buy eligible healthcare products along with their holiday shopping, for example. These improvements may seem nominal, but the small ways that Amazon can make purchases more seamless will make the difference for consumers. 

Whether Amazon is healthy for healthcare overall remains to be seen. However, as drugstore purchases pick up on, CPG brands should have the right strategy in place to defend their shelf space and win sales from competitors.