Will Amazon’s PillPack acquisition disrupt the retail pharmacy business?
Can Amazon.com replicate the success it has had with books, apparel and countless other categories to include prescription drugs? That’s the question that should eventually be answered with a definitive yes or no now that the e-tail giant has signed an agreement to acquire PillPack.
PillPack is an online pharmacy that delivers pre-sorted doses of prescribed medicines in envelopes to customers to make it easier for them to stay compliant with their medication needs, a practice that has been shown to result in better outcomes for patients.
“PillPack makes it simple for any customer to take the right medication at the right time, and feel healthier,” said TJ Parker, co-founder and CEO of the online pharmacy, in a statement to announced the deal.
The online pharmacy is licensed to fill prescriptions in all 50 states and is accredited with URAC and VIPPS. PillPack works in-network with most pharmacy benefit managers (PBMs) and Medicare Part D plans. The company has built a proprietary software system, called PharmacyOS, that enables it to deliver on its promise to meet the needs of its customers.
“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” said Jeff Wilke, CEO worldwide consumer for Amazon. “PillPack is meaningfully improving its customers’ lives, and we want to help them continue making it easy for people to save time, simplify their lives, and feel healthier. We’re excited to see what we can do together on behalf of customers over time.”
As has been the case before, Amazon’s good news is bad news for rivals. CNBC reported yesterday that Amazon’s shares increased 2.5 percent in value on news of the PillPack deal. Shares of drugstore rival CVS fell 6.1 percent at the same time while Rite Aid (-11.1 percent) and Walgreens Boots Alliance (-9.9 percent) fell even more.
Translated into dollars, Amazon’s stock increased nearly $20 billion in market value. Walmart, which was in talks to acquire PillPack before the deal with Amazon was announced, lost more than $3 billion in market capitalization on the news. Reports put Walmart’s bid for Pillpack at around $700 million, while Amazon’s reported bid was roughly $1 billion.
A number of grocery stocks saw their share prices decrease last year when Amazon announced its acquisition of Whole Foods. The good news, as USA Today reports, is that most of those negatively affected at the time have seen their share prices bounce back.
The deal between Amazon and PillPack is subject to regulatory approvals and other standard closing conditions.
- PillPack: A New Kind of Pharmacy – YouTube
- Amazon to Acquire PillPack – Amazon.com
- Walgreens, CVS and Rite-Aid lose $11 billion in value after Amazon buys online pharmacy PillPack – CNBC
- Amazon wiped out $17.5 billion from eight companies in one day – CNBC
- Buying PillPack would have cost Walmart about $700 million. Not buying it wiped $3 billion off the stock – CNBC
- Walgreens, CVS, Rite Aid suffer “Death by Amazon” stock market pain – USA Today
DISCUSSION QUESTIONS: What will Amazon’s acquisition of PillPack mean to the online retail prescription drug market? What effects will it have on brick and mortar competitors? What impact, if any, do you think it will it have on PBMs and pharmaceutical manufacturers?