SEATTLE — Amazon.com has made its long-awaited entry into the pharmacy industry with the acquisition of PillPack, an online pharmacy that delivers medications in presorted, easy-to-use dose packaging.
Citing “a person familiar with the matter,” Bloomberg News estimates that Amazon will pay about $1 billion for the online pharmacy, which bills itself as “a pharmacy designed to provide the best possible customer experience for people who take multiple daily prescriptions.”
The deal, which is subject to regulatory approvals and other customary closing conditions, is expected to close in the second half of this year.
“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” notes Jeff Wilke, Amazon’s chief executive officer of worldwide consumer. “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.”
The move is seen as a direct challenge to retail pharmacy, particularly the leading chains Walgreens and CVS Pharmacy. Predictably, investors panicked, and the share prices of both Walgreens and CVS fell approximately 8% after the deal was announced.
A number of analysts point out that PillPack’s greatest value to Amazon probably lies in the fact that it has pharmacy licenses in 49 states and is in-network with all major pharmacy benefits managers, including CVS Caremark, Express Scripts, Optum Rx, Prime Therapeutics, Humana Pharmacy Solutions, Cigna, Aetna (now part of CVS), MedImpact, EnvisionRx and CastiaRx. It is also in-network with most major Medicare Part D plans.
As a result, Amazon will be able to leapfrog some formidable hurdles to entry, including state-by-state licensing requirements, the need for scientific expertise and significant liability. “With [this] acquisition, Amazon overcomes these challenges and more,” writes PlanetRetail RNG analyst John O’Leary. “In one fell swoop, Amazon is up and running as an online pharmacy and, by retaining PillPack senior leadership, will be well positioned to navigate the complexities of the space.”
Moreover, Amazon will suddenly become a major player in the health care industry, one it has eyed for several years. And it has achieved yet another avenue to expand its engagement with consumers.
“The acquisition of PillPack puts Amazon in a position to become even more entrenched in people’s everyday lives and offer shoppers everything they need, straight to their doorstep,” says Sylvain Perrier, president and chief executive officer of Mercatus, a provider of digital solutions for grocery retailers.