Amazon about to acquire PillPack; news caused $14B loss to drug pharmacies

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Amazon.com, Inc., doing business as Amazon, is an American electronic commerce and cloud computing company based in Seattle, Washington that was founded by Jeff Bezos on July 5, 1994.

PillPack, a 2013 online pharmacy drug deliverer startup founded by is a full-service pharmacy that sorts your medication by the dose and delivers to your door.  (Introduction about PillPack | How PillPack Works)

1. Succinct view
2. Other notables
3. Tech People's response
4. References (refer this link to read in detail about this context)

1. Succinct view
  • By the second quarter half of 2018, Amazon about to acquire PillPack of roughly below $1 Billion
  • News caused Amazon shares to go up by +2.5% while causing other pharmacy companies loses their shares (Wallgreens -8.5%; CVS -8.9%; Rite Aid -3%)
  • Pharmacy chains and drug wholesalers lost about $14 billion US in market value on Thursday, while Amazon gained about $5.5 billion US.
  • Many believe that Amazon is trying for long time to enter into the Pharmacy market; the acquisition of PillPack will help them learn more about the pharmacy market first handed and proceed accordingly (whether to invest more or to improve in any other pharmacy sector)
  • PillPack holds pharmacy licenses in all 50 states. It is an in-network pharmacy for some PBMs and for major Medicare Part D plans, a federal drug benefit to help Medicare beneficiaries pay for self-administered prescription medicines.
  • Wallmart also involved in trying to acquire PillPack; but the offer from Amazon is more and PillPack bailed from Wallmart
2.     Other notables
  • Express Scripts dropped PillPack from its network in April 2016, alleging that it had misrepresented itself as a retail pharmacy. The two reached an agreement a month later.
  • CVS’s $66 billion bid for insurer Aetna Inc. was in part an attempt to position the company to better defend against Amazon as a potential rival. 
  • Express Scripts agreed to be bought by health insurer Cigna Corp. for $54 billion, while AmerisourceBergen has discussed a deal with Walgreens, The Wall Street Journal has reported.
  • Amazon has had an on-again-off-again interest in health care. In 1999, it bought a 40% stake in Drugstore.com Inc. Drugstore.com eventually was bought by Walgreens, which said in 2016 it was shutting down the site to focus on its own digital efforts.
  • In 2016, U.S. consumers spent $328.6 billion on retail prescription drugs, according to U.S. government data. CVS had prescription sales of $59.5 billion last year, while Walgreens sold $57.8 billion worth of drugs in its fiscal 2017.
3.     Tech People's response
  • Neil Saunders, managing director of GlobalData Retail said "Amazon's acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space."
  • Walgreen CEO Stefano Pessina, on a conference call after reporting quarterly results, said he was "not particularly worried about the PillPack deal. The pharmacy world is much more complex than just delivering certain pills or certain packages. We know that we have to change the level of our services to the customers, and we are working quite hard on that direction."
  • Morningstar analyst Vishnu Lekraj said "I believe they bought this to learn about the market and to determine if they are able to make larger investments".
  • Michael Rea, CEO of Rx Savings Solutions, said in an email, " A sign of the times. - PillPack could transform the industry and that employers and health plans would benefit from the deal. This move signals just how big of a market opportunity there is to change the pharmacy landscape".
  • Joseph Feldman, an analyst with Telsey Advisory said “When Amazon sneezes, everybody else catches a cold. And I think that that’s more likely than not what you’re going to see today".
4.     References
My Thoughts
  • Not an expert in these; but when I saw this news something inside told me "Winter is coming" as in like we all know Amazon is serious about getting into the Pharmacy sector and they are trying since 2000. Amazon is really capable enough to outrun many pharma-based companies if it has sufficient time-frame. this quote is giving a better view over Amazon's move stating "the health-care market may be challenging for Amazon to disrupt. It is highly regulated, and depends on a complex web of contracts, interconnected data systems and other relationships with health plans, drug-benefit managers and other health-care players that Amazon may not want to alienate if it wants its pharmacy business to prosper".


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