Amazon could shake up drug retail industry with PillPack deal

BANGALORE, INDIA Amazon.com Inc said Thursday it would buy small online pharmacy PillPack, a move that will put the world’s biggest retailer in direct competition with drugstore chains, drug distributors and pharmacy benefit managers.

The potential of Amazon’s move to disrupt major players across the drug supply chain on a nationwide level prompted a sell-off in shares of potential future rivals, while sending its own shares up two per cent.

PillPack supplies pre-sorted prescription drugs and other services for people who take multiple medications, a growing market as the U.S. population ages and requires treatment for multiple complex, chronic conditions.

The value of the deal was not disclosed. Bloomberg reported it to be US$1 billion, citing a person it said was familiar with the matter.

The announcement cost drugstore and medical wholesaler investors around US$19 billion in stock losses on Thursday, while Amazon gained about $5.2 billion in value.

CVS Health’s stock fell nearly eight per cent, while Walgreen Boots Alliance dipped 10 per cent. Shares of drug wholesalers McKesson Corp, Cardinal Health and Amerisource Bergen also fell sharply.

Although brick-and-mortar stores might feel the effects of Amazon’s competition, the biggest battles will likely be fought by the mail-order pharmacies, which generally serve patients with chronic conditions such as heart disease that may require drugs to control blood pressure, cholesterol and other problems.

Some of the largest mail order pharmacies are controlled by pharmacy benefit managers such as Express Scripts and CVS, which offer financial and other incentives to patients to fill their prescriptions with them.

“Amazon’s acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space,” said Neil Saunders, managing director of GlobalData Retail.

Walgreens chief executive Stefano Pessina, in a conference call, said he was “not particularly worried” about the PillPack deal, describing it only as a “declaration of intent” by Amazon.

“The pharmacy world is much more complex than just delivering certain pills or certain packages,” Pessina said.