Meet Amazon’s New Prescription Plan: RxPass

What are the benefits and limitations of Amazon’s RxPass to Prime members?

With Amazon’s new RxPass, Prime members can pay $5 a month to access a number of generic medications. While this offers members new benefits, it also raises some questions.

Amazon insists RxPass isn’t technically “insurance,” although it has many characteristics of an insurance plan: individuals transfer risk from themselves onto Amazon, there’s a monthly fee, and a formulary of covered drugs.

RxPass is similar to other limited supplemental health insurance products, such as critical illness insurance that doesn’t pay medical bills, but pays a policy-holder a lump-sum if they develop a particular disease.

These types of policies can be valuable to consumers—at the right price. Surprisingly, the cost of generic medications with insurance might actually be higher than the cost if you pay out of pocket. If you’re already an Amazon Prime member, $5 per month with Amazon’s RxPass could be a cheaper way to get generic drugs than using your insurance or paying out of pocket. If you aren’t a Prime member, the math becomes more complicated.

However, a danger is that consumers overestimate the coverage they are getting and do not realize the risks they remain exposed to. RxPass doesn’t cover branded drugs and isn’t a replacement for comprehensive prescription drug insurance.

How does RxPass fit with Amazon’s strategy?

RxPass’s low price point and convenient user interface might entice consumers to try Amazon for their generic prescriptions, and it has already been successful in getting media attention.

As Amazon looks to expand its Pharmacy program, RxPass is likely to be a valuable loss leader.  Covering generic medications for $5/month might be a better deal than consumers are getting from their existing pharmacy, and they might be willing to try something new.

While Amazon shut down its telehealth service, Amazon Care, at the end of 2022, it continues to expand in the healthcare domain, with its planned acquisition of One Medical, a company delivering primary-care.

Is the retail pharmacy market likely to be impacted by RxPass’ efforts?

RxPass might take some market share from existing retail pharmacies, especially if customers identify they are getting a bad deal. But in the long-term, RxPass and Amazon Pharmacy is a more direct threat to competing mail order pharmacies that have a less developed online experience for shopping and price comparison.