Amazon's new pharmacy is way more expensive than one of its key rivals, showing the long road ahead for the tech giant's ambitions to disrupt the industry

  • As part of Amazon Pharmacy's launch on Tuesday, Amazon said it's offering discounts on drugs for Prime members. 
  • Wall Street's response has been to ditch pharmacies and prescription discount company GoodRx, sending their stocks plummeting Tuesday. 
  • One bank, SVB Leerink, compared the Prime deals to GoodRx's.
  • On average, the 10 most commonly prescribed drugs were 47% more expensive on Amazon compared to GoodR'x standard pricing.
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Amazon's new pharmacy service, announced on Tuesday, is all Wall Street can talk about. 

Called Amazon Pharmacy, it offers discounts on drugs and free, two-day shipping for Prime members. Customers in 45 states can now shop online for their medication. 

It's sent healthcare stocks tumbling. Among those hit the hardest was GoodRx, a company that just went public in September, and offers coupons and price-comparing services to users. As of Wednesday, GoodRx had fallen by more than 27% on the news compared to Monday's close. On Thursday morning, it recovered by a few dollars to about 20% less than Monday.

Read more: Amazon just put the entire healthcare industry on notice with its latest push into pharmacy. Here's who stands to win and lose.

Analysts have been saying Amazon Pharmacy is a direct competitor to GoodRx that could cut down on its customer base, or worse, make its discounts unnecessary.

Amazon's offering discounts of 80% on generic drugs and 40% on brand-name drugs for Prime members that don't pay with insurance.

But those discounts aren't necessarily the best discounts out there. In a note Tuesday, SVB Leerink analysts Stephanie Davis, Joy Zhang, and Joseph Civello compared the two companies' deals, finding that GoodRx's are way cheaper than Amazon's.

Specifically they looked at the top 10 most commonly prescribed drugs, including Lisinopril for high blood pressure and albuterol for asthma.

Amazon's savings benefit from Prime members yielded a lower cost in five of the medications. But on average, the 10 drugs were 47% more expensive on Amazon compared to GoodR'x standard pricing. For GoodRx Gold, a membership program, the difference was even more stark. The same 10 drugs were 144% more expensive with Prime.

How Amazon Pharmacy secured discounts for Prime members

Amazon Pharmacy's Prime savings were negotiated through Express Scripts, the pharmacy benefits manager owned by insurer Cigna. PBMs are middlemen that administer pharmacy benefits for health plans and secure discounts from drugmakers and pharmacies.

Amazon's savings card works in 50,000 pharmacies in Express Scripts' network. 

It's a smaller network compared to GoodRx's. The company works with 13 PBMs to secure deals that work in 70,000 pharmacies. 

GoodRx CEOs Doug Hirsch and Trevor BezdekGoodRxSVB Leerink and RBC Capital Markets came to GoodRx's defense on Wednesday and Thursday, arguing that the market's overreacted to the Amazon news when it comes to GoodRx's stock. RBC analysts said GoodRx will remain the leading player when it comes to discount cards. And Amazon Pharmacy is somewhat of a validation of GoodRx's business model, the Leerink analysts said.

Read more: Wall Street analysts say buy these 2 healthcare stocks spring-loaded for gains after getting pummeled by Amazon Pharmacy — including one poised to surge 81%

GoodRx co-CEO Doug Hirsch has made several appearances on the big news networks saying that GoodRx isn't a direct competitor with Amazon. Indeed, Amazon Pharmacy and PillPack both accept GoodRx coupons. 

"Look, we've covered AMZN for over two decades and fully appreciate their ability to disrupt and win markets, especially those with commodity characteristics," RBC analysts Mark Mahaney and Sean Dodge said in a note on Thursday morning.

But retail pharmacy is a different beast, they said.

"Frankly, GoodRx has to date very effectively created a win-win-win offering for consumers, pharma retailers, and PBMs that we don't believe will be easily upended," Mahaney and Dodge said.

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