Amazon Makes Big Foray into Healthcare with PillPack Deal

Amazon is jumping headfirst into its plans to disrupt the healthcare industry by purchasing online drug distributor PillPack in a $1 billion deal, The Seattle Times reports. Amazon’s purchase of the online pharmacy startup will give it an immediate nationwide drug network, representing a formidable threat to entrenched retailers, suppliers and middlemen.

PillPack image via The Seattle Times

Amazon’s move to selling prescription drugs represents a formidable challenge to pharmacy chains including Walgreens and CVS Health, the two largest drugstore chains in the U.S. When news of the proposed purchase broke on June 28th, shares of Walgreens and Rite Aid dropped more than 9 percent, and CVS Health shares dropped 6 percent.

“The deal is precisely the kind of news that the healthcare industry has been fearing for months, as Amazon hinted it was interested in expanding its reach to include prescription drugs, a $560 billion business,” The Seattle Times reports.

“[Amazon] faced the problem of securing pharmacy licenses in each state. PillPack will help overcome that hurdle, since the startup is licensed to ship drugs in 50 states.

And it will be doing so without much financial stress. Amazon, which has a market value of over $840 billion, is paying about $1 billion for the startup, according to one person briefed on the deal, who was not authorized to speak about it publicly. Amazon beat out Walmart for the company, the person said.”

The Boston-based PillPack started in 2013, and is known for distributing pills in easy-to-use packages sorted by dose. PillPack brings with it the working relationships between the startup and major benefit managers and insurers. Shopping for prescription drugs online via Amazon could immensely change the game.

“Even as Americans have shifted their buying habits online, prescription drugs have remained a stubbornly brick-and-mortar purchase. About 90 percent of all prescriptions are filled at a pharmacy counter, according to Iqvia, a research firm,” the article shares.

“If Amazon can break that habit, it could upend the industry.”

For more on this story, visit The Seattle Times.