Amazon announced Thursday that it would acquire PillPack, an online pharmacy with a nationwide reach, in a deal that could quickly make the online giant a major player in the drug business.
The deal is precisely the kind of news that the health care industry has been fearing for months, as Amazon hinted that it was interested in expanding its reach to include prescription drugs.
One barrier to entry for Amazon had been the bureaucratic hassle of securing pharmacy licenses in each state. But in acquiring PillPack, it is essentially leaping over that hurdle because the company is licensed to ship prescriptions in 50 states.
Shares of Walgreens and Rite Aid dropped more than 10 percent, and CVS Health dropped 9 percent, in early trading after the announcement.
“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,†Jeff Wilke, Amazon’s chief executive of its consumer business, said in a statement. “We’re excited to see what we can do together on behalf of customers over time.â€
Terms of the deal were not announced. It is expected to close in the second half of 2018.
Anxiety over what Amazon might do in health care has unsettled the industry and has been seen as one factor in a wave of recently proposed mergers, including CVS’s acquisition of Aetna and a union between the health insurer Cigna and Express Scripts, the pharmacy benefit manager. Last fall, perhaps in a move to get ahead of Amazon, CVS announced it would offer next-day delivery of prescription drugs and same-day service in some big cities. The next-day delivery began this month, for a fee of $4.99.
PillPack, founded in 2013, an online pharmacy that distributes its pills in easy-to-use packages designed for consumers with chronic conditions and multiple prescriptions, has long been seen as a potential target for larger businesses, including Amazon and Walmart, which were looking to expand their reach in online drug sales.
PillPack is an innovative but not necessarily major player in the pharmacy world, bringing in about $100 million in revenue in 2017, according to the company.
What it did was offer a unique service — combining multiple prescriptions in easy-to-use packages — with a national reach, an attractive prospect for Amazon, said Adam J. Fein, chief executive of the Drug Channels Institute, who studies the industry.
After early tussles with pharmacy-benefit managers like Express Scripts, PillPack also managed to join the networks of major benefit managers and insurers, not an easy feat for a online pharmacy that directly competes with many of those companies’ mail-order businesses.
“It’s a turnkey mail pharmacy operation,†Mr. Fein said.
TJ Parker, co-founder and chief executive of PillPack, said in a statement: “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.â€
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