Pharmacy Stocks Under Pressure as Amazon Enters Weight-Loss Drug Market
Shares in CVS and Walgreens face headwinds as the e-commerce giant begins offering popular GLP-1 drugs like Wegovy, intensifying competition in the lucrative pharmacy sector.
Shares of major drug retailers like CVS Health (CVS) and Walgreens (WBA) faced renewed pressure as Amazon's pharmacy division escalates its push into the multi-billion-dollar market for weight-loss medications, directly threatening a key revenue stream for the incumbent pharmacy chains.
Amazon Pharmacy confirmed it will dispense popular GLP-1 drugs, including Wegovy from Novo Nordisk and Zepbound from Eli Lilly. The move represents a significant offensive into the prescription drug market, leveraging Amazon's vast logistics network and customer base to challenge the dominance of established players. The company has already partnered with Eli Lilly for direct delivery of Zepbound and is planning an aggressive expansion of its same-day prescription delivery service, aiming to cover nearly half the U.S. population by next year.
The market reaction underscores investor concern over the mounting competitive threat. While CVS shares have been somewhat insulated by the company's diversified model—which includes the Aetna insurance business and the Caremark pharmacy benefit manager (PBM)—Walgreens, which is more dependent on its retail pharmacy operations, has seen its stock hit multi-decade lows. The pressure comes not only from Amazon but also from a broader trend of drugmakers exploring direct-to-consumer sales channels that bypass traditional pharmacies entirely.
"The concern is that Amazon will peel away both retail sales and, more importantly, the foot traffic that drives front-of-store purchases for these pharmacies," noted an analyst report on the growing competition. While Amazon's current share of the U.S. prescription market remains below 1%, its deep pockets and focus on convenience are viewed as a formidable long-term challenge.
The market for GLP-1 agonists, initially developed for diabetes but now widely used for weight management, is one of the fastest-growing segments in the pharmaceutical industry, with sales projected to exceed $100 billion annually within the decade. For CVS and Walgreens, prescriptions for these high-demand, high-cost drugs represent a vital and growing source of revenue and a way to draw customers into their stores.
Amazon's entry complicates an already complex competitive landscape. In a demonstration of its market power, CVS's own Caremark PBM recently announced it would shift its preferred coverage from Eli Lilly's Zepbound to Novo Nordisk's Wegovy, citing a more favorable price. This highlights the dual role CVS plays as both a dispenser of drugs and a powerful negotiator of their prices, a structural advantage that Walgreens lacks.
For its part, Walgreens has been undergoing a significant restructuring, closing underperforming stores and shifting its focus toward providing more clinical services to diversify its revenue streams. However, these efforts may struggle to offset the margin pressure and customer attrition if Amazon's pharmacy ambitions are successful. As Amazon continues its expansion, investors are closely watching whether the traditional pharmacy giants can adapt quickly enough to defend their territory in a rapidly evolving healthcare landscape.