Coverage: Amazon is buying PillPack for $1 billion

Amazon.com Inc. said on Thursday it would buy small online pharmacy PillPack, a move that will put the world’s biggest online retailer in direct competition with drugstore chains, drug distributors and pharmacy benefit managers.

Ankur Banerjee and Bill Berkrot of Reuters had the news:

The deal’s potential to disrupt major players across the drug supply chain nationwide prompted a sell-off in shares of possible rivals, while sending Amazon shares up 2.7 percent.

PillPack supplies pre-sorted prescription drugs and other services to people who take multiple medications, a growing market as the U.S. population ages and requires treatment for multiple complex, chronic conditions.

The value of the deal was not disclosed. Bloomberg reported it to be $1 billion, citing a person it said was familiar with the matter.

Pharmacy chains and drug wholesalers lost around $14 billion in market value, while Amazon gained about $5.5 billion.

Shares of CVS Health were down 6.3 percent after falling as much as 10 percent, while Walgreen Boots Alliance was off nearly 10 percent. Shares of drug wholesalers McKesson Corp, Cardinal Health and AmerisourceBergen also fell sharply.

Angelica LaVito of CNBC.com reported that PillPack caters to consumers with chronic conditions:

Most drugstores and pharmacy benefits managers, firms that administer prescription drug plans, already offer mail services.

CVS last week announced it would offer one- and two-day delivery to all of its retail pharmacy customers nationwide and extend same-day delivery to more cities. A spokeswoman told CNBC the company thinks it’s well-positioned and ahead in the area where PillPack plays, saying CVS offers similar services.

“Keep in mind, that we have not seen a large shift of patients that are looking for their medications to be delivered versus coming to a retail pharmacy,” she said.

For Amazon to move into prescription drug delivery, though, it will need to change the shopping habits of a set of shoppers that tend to stick to a routine when it comes to how and where they buy their prescription drugs. It may also find a more limited buyer-set, as people with pressing needs like medicine for a sinus infection may have little patience to wait for online delivery.

PillPack generally caters to people with multiple chronic conditions who can benefit from its drug sorting capabilities.

Nathan Bomey of USA Today reported that Amazon could link PillPack with Prime and Alexa:

Udow-Phillips speculated that Amazon could pair PillPack with its Prime membership business to boost usage, or even build ties to Whole Foods, the grocery business it recently acquired.

Forrester analyst Arielle Trzcinski even floated the possibility that Amazon could use voice assistant Alexa to remind customers to take their medications or fill prescriptions, which could help solve one of the behavioral challenges confronting health care.

Investors in the nation’s largest drugstore chains are fretting about the deal. Shares of CVS Health and Walgreens Boots Alliance fell 7.8 percent and 9.8 percent, respectively, in morning trading. Amazon’s stock was up 2.1 percent.

But Walgreens CEO Stefano Pessina said “we don’t see any reason to be worried” about the deal.

“Of course, we are not complacent,” he said on an earnings call Thursday morning. “We know that we have to change the level of our services to the customers, and we are working quite hard on that direction, but we are not worried.”