Published: Tue, July 03, 2018
Medicine | By Douglas Stevenson

Amazon's acquisition of online pharmacy PillPack spooks retail drugstores

Amazon's acquisition of online pharmacy PillPack spooks retail drugstores

A response to growing competition from PillPack and Capsule, which is another online pharmacy startup.

Last year, a PillPack representative said the company is the "only independent pharmacy that now delivers medications nationwide". Amazon has acquired PillPack, an online pharmacy which enables customers to buy medications in pre-made doses.

"Together with Amazon, we are eager to continue working with partners across the health care industry to help people throughout the U.S. who can benefit from a better pharmacy experience", PillPack chief executive TJ Parker said in a statement.

Why it matters: The acquisition represents Amazon's biggest move yet into the healthcare sector and threatens the traditional retail pharmacy model in a major way.

Walmart was reportedly in talks to buy PillPack, but Amazon stepped in with a $1 billion offer.

Even exchange-traded fund investors are afraid of Amazon.com Inc.

PillPack, meanwhile, is already licensed to deliver medications to all 50 US states, helping Amazon clear the regulatory hurdles that might have complicated its foray into the prescription drug industry. Terms of the deal were not disclosed, but TechCrunch and Bloomberg reported the deal was for "just under $1 billion". Customers can also email, text, or call their PillPack pharmacist any time to ask questions or clarify instructions. But it also has pharmacy licenses in all 50 states and other infrastructure that could eventually help Amazon to expand broadly into the pharmacy arena.

USA stocks finished mostly higher Friday, but they surrendered most of an early gain as worries about rising tariffs once again dampened investors' enthusiasm as the second quarter came to an end.

The acquisition by Amazon comes as a range of companies are exploring mergers that could disrupt the health care system.

It was the latest example of the fear the internet retailer can inspire when it enters a new industry. The healthcare joint venture and the PillPack deal may signal that Amazon is continuing to make a thrust into the $3 trillion USA healthcare market.

The transaction is expected to close during the second half of 2018. Ann Hynes, an analyst with Mizuho Securities USA, wrote in a research note that "the bark is likely worse than its bite, at least initially", and noted that PillPack is not a very innovative offering and only has 40,000 customers.

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