Amazon acquiring online pharmacy PillPack, sending drug retailer shares down

PillPack prepackages and mails consumers pills.									Pat Greenhouse  The Boston Globe

PillPack prepackages and mails consumers pills. Pat Greenhouse The Boston Globe

But the online retail giant's decision to buy online pharmacy PillPack rapidly accelerates the threat posed to entrenched retailers, suppliers and middlemen. The company is aimed at people who take multiple prescriptions, offering services like pre-sorted dose packaging and home delivery.

PillPack has mail-order pharmacy licenses in all 50 states, which could allow Amazon to expand quickly.

That said, Pessina added, "We know that we have to change the level of our services to the customers, and we are working quite hard on that direction".

PillPack earned an "excellent" rating in PCMag's 2014 review.

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"PillPack makes it simple for any customer to take the right medication at the right time, and feel healthier", said TJ Parker, co-founder and CEO of PillPack. This system is particularly convenient for people who require ongoing repeat prescriptions, as PillPack arranges the refills and renewals on behalf of the patient. Chief Executive Officer Jeff Bezos signaled his interest in health care earlier this year when he teamed up with Berkshire Hathaway Inc.'s Warren Buffett and JPMorgan Chase & Co.'s Jamie Dimon to form a health care company to manage the health plans of their more than 1 million employees.

Still, health care is a much harder industry to enter than retail or groceries, said Vishnu Lekraj, a pharmacy industry analyst with Morningstar. "Success is going to require talented experts, a beginner's mind, and a long-term orientation".

In premarket trading, shares of drugstore chains Walgreens, CVS and Rite Aid slid.

CVS shares tumbled 8.6 percent in pre-market trade on the news, while Walgreens slumped 8.5 percent. CVS is buying insurer Aetna for while Cigna, another insurer, is scooping up pharmacy benefits manager Express Scripts.

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And what's notable about this particular case is the outsized degree of the market cap erased, relative to the price Amazon paid for PillPack. Its CEO said in November 2017 that it was on track to post more than $100 million in revenue for the year.

Shares of drug wholesalers McKesson Corp, Cardinal Health and AmerisourceBergen also fell sharply.

Brent Thill, an analyst at Jefferies, told Bloomberg the deal is the "tip of the iceberg" in terms of Amazon's plan in healthcare. The startup has raised upwards of $120 million in funding from backers including TechStars, Menlo Ventures, and Accel.

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