Amazon to buy PillPack in drug retailing push


PillPack has pharmacy licenses in all 50 states.

The Boston-based startup PillPack primarily caters to customers who take multiple medications.

The pharmaceutical supply chain, including pharmacy benefit managers and wholesalers, has been under pressure for the past one year as media reports of Amazon's push into the market spooked investors.

Drug retailers CVS Health and Walgreens Boots Alliance plunged 7 percent each in premarket trading.

The move represents a formidable threat to pharmacy chains including Walgreens Boots Alliance Inc., which earlier Wednesday reported tepid USA same-store sales, and rival CVS Health Corp. (WBA.O), which earlier Thursday reported tepid US same-store sales, and rival CVS Health Corp.

The transaction is expected to close during the second half of 2018.

Bezos already has signaled his frustration with a health-care system characterized by rising costs for consumers and companies, sometimes-poor outcomes, and unnecessary complexity. While the primary news today related to Amazon was indeed the PillPack announcement, the e-commerce giant also single-handedly wiped out when it said it would recruit entrepreneurs to run local delivery networks.

"This is a fairly big move for Amazon", said Patrick Pilch, head of the BDO Center for Healthcare Excellence & Innovation. McKesson, Cardinal Health and AmerisourceBergen shares were all down after the news.

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"Individual owners can build their business knowing they will have delivery volume from Amazon, access to the company's sophisticated delivery technology, hands-on training, and discounts on a suite of assets and services, including vehicle leases and comprehensive insurance", an Amazon statement said.

Such a move had always been expected by investors in established healthcare companies, who have long feared the world's biggest online retailer's potential to disrupt the complex and opaque US drugs business. Kroger Co. (KR.N), the biggest USA supermarket chain, saw US$2 billion in market value wiped out in one day. It recently began selling medical devices and instruments, as well.

The acquisition may turn out like, which ultimately exited the prescription business and focused on over-the-counter products before being bought by Walgreens and ultimately shutting down.

PillPack also declined to comment but disclosed that it has tens of thousands of customers and brought in more than $100 million in revenue a year ago.

For now, Walgreens indicated that it was in no hurry to find a deal to respond to Amazon, despite the damage to its stock. In April, Walmart Inc. was said to be in talks to buy the company.

"The message is very clear for pharmacy: get on with streamlining your business, improving the customer experience both physically and in a digital way".

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