Amazon to Acquire Online Pharmacy PillPack
On June 28, Amazon announced that it had entered into an agreement to buy US-based online pharmacy PillPack. Amazon did not reveal details of the consideration, but news website CNBC cited sources and reported that Amazon made an offer of $1 billion to acquire PillPack after Walmart procrastinated on delivering a higher offer to the pharmacy retailer, despite entering into negotiations months before Amazon entered the fray.
In this flash report, we outline some of the implications of this deal.
What Does PillPack Have to Offer?
PillPack sells prescription drugs in convenient packaging for patients with chronic conditions or those with multiple prescriptions. PillPack’s business arsenal is packed with several tools that Amazon will have at its disposal to become a worthy contender in drug retail and distribution:
Amazon’s Pharmacy Ambitions
As PillPack offers all of the aforementioned features, as well as its existing customer base, distribution channel, logistics network and drug retail expertise, it is easy to see why Amazon chose this route to cement its entry into the pharmacy sector.
Amazon’s intentions to penetrate the pharmacy sector have been apparent for at least a year.
We reported in November 2017 that, although Amazon had not explicitly stated its intentions to enter the pharmacy sector, it had held strategic meetings, hired relevant personnel and acquired wholesale drug distribution licenses in several states—signs that pointed to its imminent entry into the pharmacy sector.
We had also anticipated that Amazon might acquire a pharmacy chain to conduct business. While PillPack is not a pharmacy chain it does have nationwide distribution.
Other moves we had expected from Amazon if it decided to expand into the pharmacy market were:
The acquisition of PillPack seems to present opportunities for all of these to materialize.
What Else Has Amazon Done?
In January this year, Amazon took another major step into healthcare—it formed a venture along with conglomerate Berkshire Hathaway and investment bank JPMorgan to address the healthcare of their combined staff of over 1.2 million. The joint press release revealed that “the initial focus of the new company will be on technology solutions that will provide US employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”
What We Think
PillPack’s USP is that it is an online pharmacy pure play and its operations have immense potential to synergize with Amazon’s extensive retail operations. With the acquisition of PillPack, Amazon can bypass the challenges that typically accompany the entry of a new player into a segment unknown to it. Amazon’s existing scale of operations combined with PillPack’s expertise will help it reach a wider audience and compete at a similar level as established players in drug retail.