Amazon to acquire online pharmacy PillPack

Amazon to acquire online pharmacy PillPack

Amazon to acquire online pharmacy PillPack

The US market for prescription medicine is enormous, with consumers spending $328.6bn on retail prescription drugs in 2016, according to Bloomberg. PillPack and Amazon said they expected to close the deal by the end of the year.

Such a move had always been expected by investors in established healthcare companies, who have long feared the world's biggest online retailer's potential to disrupt the complex and opaque US drugs business. (CVS.N). Walgreens was down 10 per cent at 10:18 a.m. ET, while CVS shares shed 8.9 per cent.

PillPack CEO T.J. Parker explains how his online pharmacy delivery service is competing with CVS.

Last week, Amazon, JPMorgan Chase and Berkshire Hathaway announced Boston doctor Atul Gawande as the chief executive of the companies' new health care venture, which will be based in Boston. CVS is buying insurer Aetna for while Cigna, another insurer, is scooping up pharmacy benefits manager Express Scripts. But its expectation of over $100 million in 2018 revenue pales compared with larger rivals.

Amazon has been steadily creeping into the healthcare industry in recent years. The closely held firm has software that automates many routine pharmacy tasks, such as verifying when a refill is due, determining co-pays, and confirming insurance.

Bezos already has signaled his frustration with a health-care system characterized by rising costs for consumers and companies, sometimes-poor outcomes, and unnecessary complexity.

Experts said buying the company outright will allow Amazon to develop and scale a mail-order pharmacy business more quickly than if it had to develop the expertise from scratch. Shares of drug wholesalers Mckesson Corp, Cardinal Health and AmerisourceBergen were also down.

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Walgreen CEO Stefano Pessina, on a conference call after reporting quarterly results, said he was "not particularly worried" about the PillPack deal.

An aging population means we'll see an increase in health concerns and chronic conditions like heart disease, neurodegenerative diseases, and cancer that can be costly to manage.

Some analysts played down the immediate threat.

"I think this is a fundamental step for Amazon, to begin to attack the pharmacy industry", said Adam Fein, president of Pembroke Consulting and an expert on the drug supply chain.

Cantor Fitzgerald analyst Steven Halper noted that PBMs typically require health plan members to use their own mail order pharmacies.

PillPack was a 2014 finalist for Co.Design's Innovation By Design Awards.

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