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Amazon Shakes up Pharmacy Biz with Pill Pack Acquisition

July 06, 2018

 

PillPack Amazon

Amazon shook up the healthcare business last week with the acquisition of online pharmacy startup PillPack for around $1 billion.

PillPack distributes pills in easy-to-use packages designed for consumers with chronic conditions and multiple prescriptions. The company sorts prescriptions by the dose and includes a label with a picture of each pill and directions on how it should be taken. Pharmacist TJ Parker and computer scientist Elliot Cohen founded PillPack in 2013 after meeting at a medical-technology program at the Massachusetts Institute of Technology.

It has mail-order pharmacy licenses in all 50 U.S. states, which could allow Amazon to expand quickly.  PillPack also has relationships with most major drug-benefit managers, including Express Scripts and CVS, and says it works with most Medicare Part D drug plans. These relationships will help Amazon enter this complex and heavily regulated sector.

The deal sent shockwaves through an already shifting industry, sending shares of Walgreens and Rite Aid down almost 10 percent, and CVS down about 6 percent on the news.

This is big news, but it’s not surprising that Amazon has finally made its move into healthcare: In 2016 alone, Americans spent $328.6 billion on retail prescription drugs. CVS had prescription sales of $59.5 billion last year, while Walgreens sold $57.8 billion worth of drugs in its fiscal 2017.

The acquisition threatens the suppliers and retailers who have traditionally made the lion share of the profit in this sector.

Lisa Bielamowicz, president of consultancy Gist Healthcare said to Bloomberg: “This provides an avenue for Amazon to disrupt major pharmacy chains the way that they’ve disrupted booksellers, pet supplies, clothing and other big-box retailers.”

The transaction is expected to close in the second half of 2018, according to a statement from the companies.

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