The acquisition of a prized online drug delivery service marks Amazon's official move into the pharmacy market after months of speculation.
Amazon's long-awaited entrance into the prescription drug delivery market arrived Thursday morning with the purchase of PillPack, an online pharmacy startup that delivers pre-sorted dose packages of medications to its customers.
The deal comes after months of speculation about Amazon's interest in the healthcare supply chain, particularly drug delivery. By acquiring PillPack, Amazon will now have access to a proven home delivery service offered by a prescription drug company licensed in all 50 states that can also be incorporated into its online marketplace.
Financial and strategic details about the transaction were not immediately available, though the merger is expected to close by the end of the year. Amazon stocks responded positively to the news, trading up 2.1% by mid-Thursday, while PillPack celebrated the purchase in a joint press release.
"Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the U.S. who can benefit from a better pharmacy experience," PillPack CEO TJ Parker said in a statement.
Described as the "pharmacy of the future" by Wired last year, PillPack has been viewed as a strategic asset in the prescription drug market for some time. In early April, it was rumored that Walmart was close to purchasing PillPack for $1 billion as it worked to establish market strength in the healthcare industry.
Following Amazon's announcement, Walmart stocks slid 1% in mid-day trading.
Early-morning announcement shakes pharmacy stocks
As with most of Amazon's moves in the healthcare space, the purchase of PillPack sent shockwaves across Wall Street, especially among established drugstore companies:
CVS Health Corp. stock was down 6.4% by mid-Thursday, as some view Amazon's move as a "shot across the bow."
Similarly, Rite Aid Corp. stock fell nearly 11% .
Express Scripts Holding Co., a pharmacy benefit management organization, saw its stock decline 1.3%.
Stefano Pessina, CEO of Walgreens Boots Alliance Inc., said during his organization's Q2 earnings conference call Thursday morning that he's "not particularly worried" about Amazon's entrance into the prescription drug market.
"Pharmacy world is much more complex than just delivering certain pills," Pessina said.
As of 1:30 p.m., Walgreens stock was down 9.4%.
Pharmacy stocks weren't the only ones to suffer after Thursday's announcement, as prescription drug distributors hit the skids.
McKesson Corp. fell by 6.1%.
AmerisourceBergen Corp. tumbled by 4.5%.
Cardinal Health Inc. declined by 5.5%.
Amazon's purchase of PillPack comes one week after the organization, Berkshire Hathaway, and JPMorgan Chase & Co., selected Dr. Atul Gawande to serve as CEO of their joint healthcare venture.
Thursday's announcement also elicited commentary from industry players on what the impact could be on communities across the country.
"Amazon's acquisition of PillPack could address the rising number of 'pharmacy deserts' in the U.S. today," Griffin Myers, chief medical officer at Oak Street Health, told HealthLeaders Media in a statement.
"About 75% of doctor visits end with a prescription, yet consumers who live in rural or low-income urban neighborhoods don’t have the options or resources to fill those prescriptions,” Myers added. “In the future, I anticipate we’ll see increased efforts to help distribute prescription drugs to patients who need it most and increase medication adherence."
Nathan Ray, senior principal in West Monroe Partner's healthcare and life sciences practice, told HealthLeaders Media that the acquisition is another development in the overall direction of healthcare than simply a business transaction by Amazon.
"People are still stuck in the frame of mind that they need a doctor to treat their mild condition. But technology is already enabling them to self-treat for mild conditions, such as a sinus infection, and it will keep moving toward that. This acquisition could bring eventual disruption of in-person visits for mild conditions via Amazon."
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.