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Did Walmart Err When It Passed Up PillPack?

Analysis  |  By Steven Porter  
   June 29, 2018

The retail chain's market value took a $3 billion hit after online competitor Amazon swooped in to close a deal of its own.

As retail giants Walmart and Amazon each devise and execute strategies to sink their teeth into the healthcare sector, an episode Thursday involving online pharmacy PillPack has some asking a simple but pointed question: did Walmart mess up?

Walmart had originally offered just above $700 million for the online pharmacy, but the massive retail chain dragged its feet over regulatory concerns, as CNBC reported, citing a person familiar with the deal-making process.

Related: Amazon's PillPack Purchase Rattles Pharmacy Stocks

Once its online retail competitor Amazon announced Thursday that it had bought PillPack, Walmart's share prices fell $1.03, from $86.89 when markets closed Wednesday to $85.86 at Thursday's closing bell. With nearly 3 billion shares, that translates to about a $3 billion drop in market value—more than triple the offer it had reportedly been discussing with PillPack.

It's worth noting that Amazon's announcement hit drug stores and distributors hard as well. Walgreens Boot Alliance, CVS Health, Rite Aid, Cardinal Health, AmerisourceBergen, and McKessen lost a combined $14.5 billion in market value.

"I think this is a fundamental step for Amazon, to begin to attack the pharmacy industry," said drug supply chain expert Adam Fein, president of Pembroke Consulting, as The St. Louis Post-Dispatch reported. "This is the beginning of the pharmacy industry shakeout. … I think everyone right now is scrambling to figure out what this means for their business model."

Related: When Retail Giants Like Walmart and Amazon Invade Healthcare

PillPack currently has a partnership with pharmacy benefit manager Express Scripts, which is in the process of being acquired by insurer Cigna, as the Post-Dispatch reported. The contract between PillPack and Express Scripts expires at the end of next month, however, as CNBC reported.

Walmart did not immediately respond Friday morning to a request for comment.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

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