Amazon.com Inc on Thursday set its sights on the pharmacy market with the acquisition of tech-focused retailer PillPack, sending shock waves through the sector over prospects of disruption by the US online colossus.
Amazon has long been rumored to be interested in the pharmacy business and the entry by a powerful new player could unsettle a business dominated by large US chains, including CVS Health Corp and Walgreens Boots Alliance Inc.
Terms were not disclosed about the deal for PillPack, an online pharmacy which operates in all 50 US states and offers presorted dose packaging and home delivery.
Photo: EPA
Some media reports said Amazon paid US$1 billion and outbid rival retail giant Walmart Inc.
“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” Amazon Worldwide Consumer chief executive Jeff Wilke said in a statement. “We want to help them continue making it easy for people to save time, simplify their lives and feel healthier.”
CVS shares slid 6.1 percent at the close on the news, while Walgreens shares slumped 9.9 percent.
Neil Saunders of the research firm GlobalData Retail called the Amazon acquisition “a warning shot” for the pharmacy sector.
“Not only has Amazon finally made a solid move into pharmacy, it has done so via an innovative supplier which helps patients manage and organize their prescription drugs,” Saunders said in a research note. “[This] is only the first play in an increasingly aggressive strategy.”
“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,” Saunders added.
Saunders said that “Amazon’s entry into any market will put downward pressure on prices and upward pressure on costs as others try to match its service,” and that CVS and Walgreens could be vulnerable.
Walgreens chief executive Stefano Pessina on Thursday told a conference call on the firm’s quarterly results that “we are not particularly worried” about Amazon, but added that “we know that we have to change the level of our services to the customers and we are working quite hard on that.”
PillPack was launched by two members of the “hacking medicine” initiative at the Massachusetts Institute of Technology.
It helps people manage multiple medications with a software platform that offers reminders, dose-specific packaging and delivery.
The Boston-based company has said it has raised US$118 million from investors and venture funds since its launch in 2013.
“Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the US who can benefit from a better pharmacy experience,” PillPack cofounder and chief executive T.J. Parker said in a statement.
Amazon and PillPack said they expected to close the deal by the end of the year, subject to regulatory approval.
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