We don't need to tell you that Amazon has treated its long term shareholders very well. If you had purchased $1,000 worth of Amazon shares for a split adjusted $1.73 back in 1997 and held through YTD 2020, your shares would be worth over $1.8M today. Looking at more recent history, Amazon has had a pretty strong 2020 as well - shares are up over 60% since January and are showing no signs of slowing:

Amazon YTD 2020 Share Performance

A few years back, Amazon, Berkshire Hathaway, and J.P. Morgan announced their intention to enter the healthcare space and attempt to disrupt what is unquestionably an incredibly complicated and expensive monolith of an industry. Earlier this month, the world got a taste of what it will actually look like to have Amazon as a healthcare market participant.

On November 17th, Amazon announced that they would begin offering a prescription drug delivery service. The new feature will allow customers to enter their personal health information securely into Amazon and order insulin, inhalers, and a host of generic medications to their front doors. Amazon Prime members will (naturally) receive a premium version of the service which includes free two day shipping and significantly discounted prices negotiated by Amazon.

Typically, when Amazon starts encroaching on your business model bad things are on the horizon. After announcing the new service, shares of companies that you typically associate with retail pharmacy (e.g. CVS and Walgreens) reacted strongly to the downside. While Amazon's entry into the pharmacy business probably won't have immediate effects on the overall structure of the American healthcare industry, it could be a harbinger of things to come.

Healthcare is a big business in the United States. In 2018, the Centers for Medicare and Medicaid Services estimated that as a share of the nation's overall GDP, healthcare spending accounted for almost 18% - an amount equivalent to ~$11k for every man woman and child in the country. The beginning of Amazon's effort to disrupt the retail pharmacy market represents the online retail giant's first real effort at trying to carve out a slice of that $3.6 trillion pie.

Of course, Amazon faces a steep uphill climb if it wants to unseat CVS, Walgreens, and the other companies that have a serious head start in the healthcare retail space. As stands, physically going to the pharmacy is a habit for most consumers, and making the shift to a different (or online) pharmacy requires some amount of coordination with a primary care physician. Old habits die hard. Further, incumbents like CVS are also unlikely to just let Amazon disrupt a traditionally lucrative part of their business model and are expected to do what they can to entice customers to stick with a bricks and mortar pharmacist.

Still - there's a reason you don't see many bookstores anymore. Amazon has a strong track record of utilizing their platform to sell customers an ever growing number of the essentials required for everyday life. What is beginning as an online pharmacy could conceivably grow to include a number of digital health services and insurance products. Clearly Amazon's "customer obsessed" strategy has translated into massive share price gains over the years, and healthcare could soon be another tailwind for shares.