Amazon to Buy Online Pharmacy PillPack, Jumping Into the Drug Business - The New York Times
In the world of health care, PillPack, an online pharmacy, is a pretty small player. Its work force of 1,000 or so people pales in comparison with the 235,000 who work for Walgreens.
But when Amazon announced on Thursday that it was buying PillPack, the deal immediately shook the industry. Shares of Walgreens and Rite Aid tumbled more than 9 percent, while CVS Health dropped 6.6 percent.
That’s because with one move, Amazon answered the question about when — and how — it would grab a piece of the $560 billion prescription drug industry.
It was precisely the sort of deal that the health care industry had feared.
Amazon has been hinting at its interest in selling drugs, but it faced the problem of securing pharmacy licenses in each state. PillPack will help overcome that hurdle, since the start-up is licensed to ship drugs in 50 states — clearing the way for the e-commerce giant to quickly become a major player in the business.
“It’s a turnkey mail pharmacy operation,” Mr. Fein said.
Even as Americans have shifted their buying habits online, prescription drugs have remained a stubbornly brick-and-mortar purchase. About 90 percent of all prescriptions are filled at a pharmacy counter, according to Iqvia, a research firm.
Independent online pharmacies have had a tough time because consumers who do buy their prescriptions through mail order are often required to do so by their insurance plans. Pharmacy benefit managers have traditionally offered employers and insurers incentives requiring that long-term prescriptions be filled through the managers’ own mail-order pharmacies.
And for short-term prescriptions, like antibiotics, many consumers prefer their corner drugstore, since they often need to fill those drugs right away. About 85 percent of prescriptions in the United States are for refills, according to Iqvia.
The deal for PillPack could be just one piece in Amazon’s broader health ambitions.
In January, Amazon, Berkshire Hathaway and JPMorgan Chase announced plans to form an independent health care company for their employees in the United States, in what could become an incubator for new ideas. Last week, the companies said Dr. Atul Gawande, a Harvard surgeon and staff writer for The New Yorker, would become chief executive of the business.
Amazon has also pushed to expand its medical supplies business, seeking to become a major supplier for hospitals and outpatient clinics. It received wholesale pharmacy licenses from several states this year that permit it to start selling medical equipment to businesses. Its products could be used to supply operating and emergency rooms, along with outpatient locations.