Amazon jumps into drug business with PillPack acquisition
Amazon.com said Thursday that it has agreed to acquire online pharmacy PillPack, confirming months of speculation that the internet retail giant would jump into the pharmacy sector and further disrupt the rapidly changing health care industry.
Privately held PillPack, founded in 2013, is still a relatively small player, with an estimated $100 million in annual revenue. But Amazon – with $178 billion in sales last year, exceptional technology, far-flung distribution capabilities and a history of disrupting other industries – poses a formidable threat.
In addition, PillPack holds pharmacy licenses in all 50 states and has relationships with most major drug-benefit managers such as Express Scripts Holding Co., eliminating Amazon’s need to build those ties from scratch.
The PillPack deal “is a declaration of intent from Amazon” to charge headlong into the pharmacy business, Walgreens CEO told analysts on a conference call Thursday.
PillPack sells and ships medications in presorted doses from its pharmacy in Manchester, New Hampshire, to every state except Hawaii, mainly for customers with multiple daily prescriptions.
The firm also coordinates drug refills and renewals, confirms insurance and helps determine customer co-payments.
Terms of Amazon’s agreement to buy PillPack were not disclosed. The purchase is expected to be completed in the second half of this year.
The PillPack deal would be the latest example of the rapidly changing landscape in the health care industry due to consolidation that’s partly occurred in response to expectations that Amazon, led by billionaire chief executive Jeff Bezos, would soon jump into the pharmacy sector.
Health insurer Cigna Corp. agreed in March to buy Express Scripts for about $52 billion in cash and stock. That deal came four months after CVS, the nation’s largest drugstore chain, agreed to buy Cigna rival Aetna Inc. for $69 billion. And grocery operator Albertsons Cos., which also owns Vons and Safeway, announced plans in February to buy Rite Aid for an undisclosed price.
In addition, Amazon and two other major U.S. companies, the bank JPMorgan Chase & Co. and Warren Buffett’s conglomerate Berkshire Hathaway Inc., in January announced a joint plan to find ways of reducing health care costs for their U.S. employees.
The companies said their focus would be mainly on providing improved health care for their own U.S. workers, who total nearly 1 million. But the move triggered speculation that any solutions they develop could quickly spread through the industry.