Pharmacy shares drop on news Amazon is buying online prescription company PillPack
Jun 30 2018
Despite the retailer's vast reach, getting into prescription drugs presented a daunting logistical challenge in terms of licensing and dealing with a range of private and government payers. "It's going to take a long time for them to disrupt the market". The closely held firm has software that automates many routine pharmacy tasks, such as verifying when a refill is due, determining co-pays, and confirming insurance.
Shares of drug retailers CVS Health and Walgreens Boots Alliance plunged 7 percent each in premarket trading. In January, Amazon, Berkshire Hathaway and JPMorgan Chase announced plans to create an independent company that's "free from profit-making incentive" and geared toward providing innovative healthcare solutions to their USA employees. But the deal alone won't likely address a bigger problem for patients and their employers: the high cost of many drugs. But its expectation of over $100 million U.S. in 2018 revenue pales compared with larger rivals.
It happened last October when the St. Louis Post-Dispatch reported Amazon had received approval for wholesale pharmacy licenses in at least 12 states. The company raised more than $118 million from brand-name investors including Accel, Sherpa Capital and NY rapper Nas's Queensbridge Venture Partners. "We should also expect secure prescription lockers at Whole Foods locations so that customers can grab their groceries and prescriptions in a convenient manner".
"We already have the capabilities that PillPack is offering and we have scale in the business", a company representative toldCNBC.
Michael Rea, CEO of Rx Savings Solutions, said PillPack could transform the industry and that employers and health plans would benefit from the deal, which he called a "sign of the times".
"The health care space and pharmaceutical space in particular are very complex, nuanced markets", Lekraj said.
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".
"Amazon is still in the early stages of figuring out the best way to tackle the health-care retail market".
Cantor Fitzgerald analyst Steven Halper noted that PBMs typically require health plan members to use their own mail order pharmacies. While the primary news today related to Amazon was indeed the PillPack announcement, the e-commerce giant also single-handedly wiped out when it said it would recruit entrepreneurs to run local delivery networks.
"Together with Amazon, we are eager to continue working with partners across the health care industry to help people throughout the United States who can benefit from a better pharmacy experience", PillPack chief executive TJ Parker said in a statement.
The deal is expected to close during the second half of 2018 and is subject to customary closing conditions.