The purchase of US pharmacy PillPack is seen as a notice of Amazon’s intent to establish itself in the healthcare industry
Amazon said it plans to acquire online pharmacy PillPack, sending its clearest message yet that it plans to enter the health care market.
PillPack aims primarily at people who take multiple medications for chronic ailments, delivering drugs in pre-sorted dose packages as well as helping to coordinate refills and renewals.
The move followed months of speculation that Amazon was planning a health care deal. It sent shares in large pharmacies, including CVS Health and Wallgreens Boots Alliance, sharply lower in Thursday trading.
“Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the US who can benefit from a better pharmacy experience,” said PillPack co-founder and chief executive TJ Parker.
The company was founded in 2013 and ships to every US state except Hawaii. Last year it said it expected to take in $100 million (£76m) in revenues.
It has raised about $120m from investors, including Silicon Valley venture capital firms Accel and Menlo Ventures.
Amazon didn’t disclose the terms of the deal and didn’t provide details on how it plans to integrate PillPack into its existing business, or whether there are plans for international expansion. Reports said Amazon had paid less than $1bn.
Last year Amazon disclosed it had won approval from some state regulators for drug distribution.
It has also joined with JPMorgan Chase and Berkshire Hathaway to create a not-for-profit healthcare company that aims to reduce bills for employees, with expansion in mind to “potentially all Americans”.
Neil Saunders, managing director of GlobalData Retail, said Amazon’s latest acquisition is a “warning shot in what is about to become a major battle within the pharmacy space”, adding the firm expects Amazon to become “increasingly aggressive” in the market.
“This is incredibly bad news for traditional players, like Walgreens and CVS, who stand to lose the most from Amazon’s determination to grow its share,” he said.
GBH Insights analyst Daniel Ives said the move “may be the first step of many”, while Baird analyst Colin Sebastian said Amazon could bundle prescriptions with other products as a way to attract more members to its lucrative Prime service.
Last year Amazon bought Whole Foods for $13.7bn, a move seen as a shot across the bows of large grocery chains.
In a conference call after reporting quarterly results, Walgreens executive chairman Stefano Pessina said he was not particularly worried about the acquisition, considering it only a “declaration of intent” from Amazon.
“Pharmacy work is much more complex than just delivering certain pills or certain packages,” he said. “The role of the physical pharmacy will continue to be very, very important in the future.”