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Pharmaceuticals industry barriers are too high for Amazon: investor

Barriers into the pharmaceutical enterprise is perhaps too high even for Amazon, mentioned billionaire hedge-fund supervisor Larry Robbins.

Last fall, a report surfaced that the e-commerce large had obtained wholesale pharmacy licenses in a number of states in an try and enter the pharmaceutical market and reduce rising health-care prices.

While Robbins acknowledged Amazon will probably strive in some type to enter the market, the percentages are stacked in opposition to the corporate.

“You want separate custody, choose, pack, and ship amenities across the United States,” Robbins instructed CNBC’s David Faber through the Sohn Conference in New York on Monday. “You can’t commingle opioids or narcotics with other general merchandise goods. You need cold storage through the entire chain. Plus, you need to connect all the suppliers with all the customers. The customers aren’t necessarily Amazon’s consumers, but the customers are places where pharmacy actually happens.”

Health-care prices are rising not due to the supply mannequin, Robbins added, however reasonably as a result of the U.S. inhabitants is growing older and since the U.S. is a “compassionate nation.”

“We spend a lot in end-of-life care,” he mentioned. “I don’t think any of those companies or any of us are going to change those facts and circumstances.”

Robbins, who’s the CEO and founding father of Glenview Capital Management, a agency that has greater than $16 billion in belongings below administration, identified that UPS tried unsuccessfully to enter the pharmaceutical distribution enterprise in 2006.

Most of the four billion prescriptions disbursed within the U.S. every year are stuffed at one in every of 60,000 retail pharmacy areas.

In January, a report from the monetary analysis agency Leerink mentioned Amazon had expanded its group exploring entry into the pharmaceutical enterprise to as many as 40 individuals.

Then earlier this month Amazon Business, which sells in bulk to companies, put the brakes on its plan to promote and distribute pharmaceutical merchandise after it failed to steer massive hospitals to change the best way they buy provides. Typically, hospitals purchase provides in bulk by way of a sequence of middlemen and long-standing relationships.

And nothing beats an in-person pharmacist, Robbins mentioned.

“Unlike many businesses that Amazon has appropriately automated, there’s always going to be a human pharmacist that has a role both regulatorily as well as consumer preference because we’re dealing with life-saving medical issues,” he mentioned.

However, Robbins stays bullish on health-care shares and made his pitch for firms to observe. His picks embrace the Express ScriptsCigna and CVSAetna mergers and McKesson.

“In this market where everyone keeps telling us where the market’s so expensive, everything’s picked over, we’ve now talked about five or six or seven stocks that all seem to be trading around 10 times earnings,” he mentioned.

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About Jason Doughty

Jason M. Doughty writes for Investing and Strategy sections in AmericaRichest.

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