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Amazon To Buy Online Pharmacy PillPack, Enter Into Health Care Sector

June 28, 2018 - 2:43 pm
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NEW YORK (WCBS 880/CBS News) -- The reach of Amazon is growing, with the retail giant now looking to try its hand in the health care sector.

Amazon has agreed to buy the online pharmacy startup PillPack.

PillPack, which is aimed at consumers who take multiple medications, presorts customers' prescriptions and helps manage refills and shipping. The service is available in 49 states, with its main pharmacy located in Manchester, New Hampshire. 

"PillPack's visionary team has a combination of deep pharmacy experience and a focus on technology," Jeff Wilke, chief executive officer of Amazon Worldwide Consumer, said in a statement. 

Amazon said the deal is expected to close in the second half of 2018.

Robert Langreth of Bloomberg said long-term, the move will pose a threat to the pharmacy system now dominated by drugstore giants such as Walgreens and CVS.

“This is a clear signal that Amazon wants to establish a toehold, you know, in the pharmacy area – in the mail-order pharmacy area. This is a very kind of innovative, small company they’re acquiring. So yeah, I mean, Walgreens stock was down… very substantially on the move, because this signals, you know, Amazon really is going to get into this business,” he told WCBS 880’s Kevin Rincon.

Langreth noted that Amazon already sells some of the front-of-the-store pharmacy items already sold at drugstores, and would love to package them with basic packages of drugs they can send out via mail order.

“They’re not commenting on their plans; what they’re going to do once they acquire it. But this is, you know, a very attractive acquisition for Amazon. This PillPack – it already has kind of the infrastructure. It has licenses in 50 states to mail out mail-order drugs, and for Amazon, that’s something it doesn’t have. It’s very valuable. And it has, you know, call centers, and it has four separate pharmacy locations – the mail order pharmacy locations,” he said. “So it, you know, it was one fell swoop. It’s a small company they’re buying, but they, you know, are in, and licensed, in the mail-order pharmacy business.”

There are other factors that make the acquisition attractive, Langreth said.

“(PillPack) is a company that doesn’t just focus on the consumer website. It actually, you know, focused on, you know, improving the consumer experience; on getting people; mailing out people who need multiple drugs a month, and having a very straightforward, simple experience that all the different were combined into, you know, pill packs, literally, you could take, with all the pills you’re taking each day,” he said.

Langreth further noted that PillPack is led by a pharmacist who knows what consumers need, and has developed software to streamline the disjoined systems that make it hard for patients to manage their prescriptions.

“And now, as soon as this deal closes, Amazon is a mail-order pharmacy, and that is tremendously threatening to the existing incumbents – both the retail pharmacies like Walgreens and CVS, but also the mail order pharmacies; the existing pharmacy benefit managers, which has been a big profit center for them,” he said.

The move sent pharmacy companies' shares tumbling, with CVS shares falling 9.2 percent and Walgreens Boots Alliance shares dropping 10.5 percent in early trading. Walgreens Boots, the Dow Jones industrial average's newest member, had earlier reported a strong earnings quarter.

Amazon's stock opened slightly higher, up .5 percent.

Amazon's foray into the pharmacy space had been expected. Late last year, the e-commerce giant received wholesale pharmacy licenses in at least 12 states, including Alabama, Arizona, Connecticut, Idaho, Louisiana,  Michigan, Nevada, New Hampshire, New Jersey, North Dakota, Oregon and Tennessee, according to the St. Louis Post-Dispatch. Some states require the permits to sell "professional use only" medical devices to medical and dental practices, rather than to patients. Those would include procedure trays, sutures, and syringes. 

In January, Amazon, Berkshire Hathaway and JPMorgan Chase announced they would be forming a new health care company for their employees aimed at tackling rising health care costs "free from profit-making incentives and constraints." Earlier this month, well-known author and surgeon Dr. Atul Gawande was named as CEO of the Boston-based venture.

(© 2018 WCBS 880. CBS News contributed to this report.)