June 28, 2018

Amazon Makes $1 Billion Splash in Health Care, Buying PillPack

Amazon.com Inc. is buying its way into the heart of the U.S. health-care system, instantly shaking up a prescription-drug industry already in the midst of a broader transformation.

Insurance companies and drug-benefit managers have struck a series of deals in recent months designed in part to thwart a potential big splash in the health world from Amazon. But the online retail giant’s decision to buy online pharmacy PillPack rapidly accelerates the threat posed to entrenched retailers, suppliers and middlemen.

Most immediately, the move represents a formidable challenge to pharmacy chains including Walgreens Boots Alliance Inc. and CVS Health Corp., the two largest drugstore chains in the U.S. Walgreens shares sank 8.5 percent at 10:49 a.m. in New York, while CVS shares shed 8.9 percent.

“This provides an avenue for Amazon to disrupt major pharmacy chains the way that they’ve disrupted booksellers, pet supplies, clothing and other big-box retailers,” said Lisa Bielamowicz, president of consultancy Gist Healthcare.

Amazon will pay about $1 billion for Boston-based PillPack, according to a person familiar with the matter. The transaction is expected to close in the second half of 2018, according to a statement from the companies.

PillPack has mail-order pharmacy licenses in all 50 U.S. states, which could allow Amazon to expand quickly. PillPack also has relationships with most major drug-benefit managers, including Express Scripts and CVS, and says it works with most Medicare Part D drug plans. Those ties will give Amazon access to much of the prescription drug market in the U.S.