Amazon to acquire online pharmacy PillPack

Jermaine Castillo
June 30, 2018

Instead of packaging user medications by the prescription (with a month's worth of one drug in one bottle and another drug in another bottle, for example), PillPack packages medications by the dose.

The move sent shares of drug distributors and retailers lower. "We're excited to see what we can do together on behalf of customers over time", said Wilke. "It's going to take a long time for them to disrupt the market".

The move represents a formidable threat to pharmacy chains including Walgreens Boots Alliance Inc., which earlier Wednesday reported tepid US same-store sales, and rival CVS Health Corp. The closely held firm has software that automates many routine pharmacy tasks, such as verifying when a refill is due, determining co-pays, and confirming insurance.

The deal - for which terms were not immediately disclosed - marks Amazon's latest push into the healthcare industry.

In premarket trading, shares of drugstore chains Walgreens, CVS and Rite Aid slid. Earlier this year, Amazon CEO Jeff Bezos, along with fellow CEOs Warren Buffett of Berkshire Hathaway Inc. and Jamie Dimon of JPMorgan Chase & Co., announced an unnamed venture to tackle healthcare access and costs for their employees.

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Although brick-and-mortar stores might feel the effects of Amazon's competition, the biggest battles will likely be fought by mail-order pharmacies, which generally serve patients with chronic conditions such as diabetes and heart disease that may require drugs to control blood pressure, cholesterol and other problems. But its expectation of over $100 million United States in 2018 revenue pales compared with larger rivals.

Mr Read says the size of the Australian market may be some protection for pharmacy - but Amazon could use the sector as a "leverage point" to gain greater traction in other areas. The company raised more than US$118 million from brand-name investors including Accel, Sherpa Capital and NY rapper Nas's Queensbridge Venture Partners.

"While we can argue that PillPack's scale is minuscule and it is hard to envision it being particularly relevant broadly for the foreseeable future it just won't matter frankly". McKesson, Cardinal Health and AmerisourceBergen shares were all down after the news.

Michael Rea, chief executive officer of Rx Savings Solutions, said PillPack could transform the industry and that employers and health plans would benefit from the deal, which he called a "sign of the times".

In the world of health care, PillPack, an online pharmacy, is a pretty small player.

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"I believe they bought this to learn about the market and to determine if they are able to make larger investments", said Morningstar analyst Vishnu Lekraj.

'At this juncture we are not anxious about Amazon's entrance into the prescription market, ' Cantor Fitzgerald analyst Steven Halper said in a note.

Watch out, CVS and Walgreens: Amazon on Thursday announced plans to acquire PillPack for an undisclosed sum. Led by Parker, a licensed pharmacist, it was an early entrant into the field of online medication delivery.

PillPack had attracted interest from Walmart Inc, which was looking to buy it for less than $1 billion US, CNBC reported in April.

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