Amazon’s Interesting Plan to Purchase Online Pharmacy “PillPack”
Amazon.com Inc., the world’s largest online retailer, recently announced its plans to buy PillPack, a small online pharmacy. With this move, Amazon seems to be in a catbird’s position to directly compete with drugstore chains, drug distributors, and pharmacy benefit managers. With Amazon’s presumed ability to disrupt the major players in the drug supply chain across the nation, Amazon shares have moved higher while the drug supply chains (i.e. CVS, Walgreen’s, Drug wholesalers McKesson Corp, Cardinal Health, and AmerisourceBergen) have started to drop.
The move has Amazon vying for over $450 billion of the total U.S. prescription drug market. While PillPack sales are only expected to exceed $100 million in 2018, with Amazon’s extensive customer base and shipping infrastructure, the company would potentially be able to grow quickly. Amazon could even negotiate directly with pharmaceutical companies for the ability to offer cheaper generic drugs even to those customers who lack health insurance.
No value on the deal has been disclosed, but Bloomberg reports it at $1 billion.
All this comes a week after Amazon, Berkshire Hathaway Inc, and JPMorgan Chase & Co’s joint venture of naming a CEO to be given the task of significantly cutting healthcare costs for its 1 million employees and dependents.
Although stores like CVS and Walgreens may be affected by the future competition of Amazon, mail-order pharmacies will take the biggest hit. Mail-order pharmacies tend to serve patients who have chronic conditions like diabetes and heart disease that require drugs that control cholesterol, blood pressure, and other problems.
Walgreen CEO Stefano Pessina, on a conference call after reporting quarterly results, said he was “not particularly worried” about the PillPack deal. “The pharmacy world is much more complex than just delivering certain pills or certain packages.”
The PillPack and Amazon deal is expected to close in 2018.
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