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Amazon to Buy Online Pharmacy PillPack as Rival Stocks Plunge

Amazon to Buy Online Pharmacy PillPack as Rival Stocks Plunge
(Dollar Photo Club)

Thursday, 28 June 2018 08:53 AM

Amazon.com Inc. said on Thursday it would buy online pharmacy PillPack, a small but significant step into the U.S. healthcare sector, sending shares of drug distributors and retailers lower.

Such a move had long been expected by investors in established healthcare companies, who have long feared the world’s biggest online retailer’s potential to disrupt the complex and opaque U.S. drugs business.

The deal for PillPack, which organizes and delivers prescription medications, will put it in head-to-head competition against existing drug retailers and distributors such as CVS Health and Walgreens Boots Alliance.

Shares of drug retailers CVS Health (CVS) and Walgreens Boots Alliance (WBA) plunged in nearly 10 percent in early trading. Rite Aid stock (RAD) fell 11 percent in early dealings. The three companies collectively lost $12.8 billion in market value on Thursday alone, CNBC reported.

Drug wholesalers McKesson Corp. (MCK), Cardinal Health (CAH) and AmerisourceBergen (ABC) were also down. Pharmacy benefit manager Express Scripts (ESRX) was also lower.

PillPack organizes and delivers prescription medications for its customers, including those with multiple chronic conditions, and is authorized to deliver in 49 states.

The pharmaceutical supply chain, including pharmacy benefit managers and wholesalers, has been under pressure for the past year as media reports of Amazon’s push into the market spooked investors.

The purchase also follows the announcement in January that Amazon, Berkshire Hathaway Inc. (BRKa) and JPMorgan Chase & Co. (JPM) were forming a joint venture to tackle rising U.S. healthcare costs. The three companies said they would use big-data analysis and other high-tech tools to improve care and cut waste.

“Amazon’s acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space,” said Neil Saunders, managing director of GlobalData Retail.

Walgreens’ chief executive, Stefano Pessina, said he was “not particularly worried” about the PillPack deal in an earnings conference call with analysts on Thursday, describing it only as a “declaration of intent” by Amazon.

Some analysts played down the immediate threat Amazon poses.

“At this juncture we are not worried about Amazon’s entrance into the prescription market,” Cantor Fitzgerald analyst Steven Halper said in a note. “Pharmacy networks are controlled by managed care companies and pharmacy benefit managers with captive mail order capabilities... Even if PillPack is a network provider today, it does not mean it will be a network provider in the future, especially if Amazon has designs of significantly ramping its prescription volume.”

PillPack had attracted interest from Walmart Inc. (WMT), which was looking to buy it for under $1 billion, CNBC had reported in April.

The PillPack deal is expected to close during the second half of 2018.

© 2019 Thomson/Reuters. All rights reserved.

   
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Amazon.com said it would buy online pharmacy PillPack, a small but significant step into the U.S. healthcare sector, sending shares of drug distributors and retailers lower.
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2018-53-28
Thursday, 28 June 2018 08:53 AM
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