Amazon enters online pharmacy business
E-commerce giant acquires PillPack
Amazon is jumping into the online pharmacy business, signaling the company’s plans to upend the traditional market for prescription drugs amid serious concerns about health care costs.
The tech and retail giant announced Thursday it is acquiring Boston-based online pharmacy startup PillPack, which sorts and delivers medication, including refills.
“Amazon is particularly skilled at fulfillment, at consumer engagement in terms of the supply chain and delivery of product,” said Marianne Udow-Phillips, executive director of the Center for Healthcare Research & Transformation at the University of Michigan.
It was not immediately clear if Amazon would operate PillPack independently or seek to integrate the business into its main site and app. PillPack and Amazon representatives declined to comment beyond a news release.
Udow-Phillips speculated that Amazon could pair PillPack with its Prime membership business to boost usage, or even build ties to Whole Foods, the grocery business it acquired last year.
Forrester analyst Arielle Trzcinski even floated the possibility Amazon could use voice assistant Alexa to remind customers to take their medications or fill prescriptions, which could help solve one of the behavioral challenges confronting health care.
Walgreens CEO Stefano Pessina said “we don’t see any reason to be worried” about the deal. “Of course, we are not complacent,” he said on an earnings call Thursday. “We know that we have to change the level of our services to the customers.”
He said he believes “strongly” that physical pharmacies will “continue to be very, very important in (the) future.”
For Amazon, PillPack was appealing, in part because it’s already licensed to sell prescriptions in 49 states. The company also offers drugs through major pharmacy benefit managers, including CVS Caremark, Express Scripts and Optum Rx.
For consumers, it could be good news if the deal nudges the pharmacy sector into a heated competition for customers, potentially driving down drug prices. Prescription drug spending tops $450 billion annually, according to the Pew Research Center.
Amazon CEO Jeff Bezos has voiced frustration over the state of American health care and recently co-founded a nonprofit venture alongside Berkshire Hathaway CEO Warren Buffett and JPMorgan Chase CEO Jamie Dimon in an attempt to lower health care costs and improve care.
Amazon’s acquisition of PillPack marks another development in the company’s rivalry with Walmart, which had been rumored to be weighing an acquisition of PillPack. Terms of the deal were not disclosed.
CVS and Walgreens have each made their own plays to keep pace amid signs that Amazon might enter the pharmacy business. One advantage for physical pharmacies is they can provide other medical services. Last week CVS announced that it is now offering prescription drug delivery from all of its 9,800 stores.
Still, the PillPack deal threatens to undermine the business model of physical pharmacies. “This is incredibly bad news for traditional players, like Walgreens and CVS, who stand to lose the most from Amazon’s determination to grow its share,” wrote Neil Saunders, managing director of GlobalData Retail.
T.J. Parker, the son of a Concord, New Hampshire, pharmacist couple, co-founded PillPack several years ago. He told USA TODAY in September 2015 the company had $20 million in annual revenue at the time.
The company’s strategy of presorting medicine into disposable dispensers and its easy-to-use app gained favor with customers.