USA stocks are closing higher Thursday as gains for technology companies and banks help the market recover some of the previous day's losses. While some drugstores already do home delivery, the news is still painful for brands that may not be ready to compete against the might of Amazon. A person who takes five different medications each morning, for example, could receive a packet with all the pills in a single pouch, instead of having to manually sort the doses into pill boxes for each day.
PillPack, which launched in 2014, is available in every USA state except Hawaii.
The acquisition by Amazon comes as a range of companies are exploring mergers that could disrupt the health care system.
In the fiscal third quarter, Walgreens Boots Alliance Inc. earnings jumped 15 percent to $1.34 billion.
Neil Saunders, managing director of GlobalData Retail, called the acquisition a "warning shot" by Amazon to others in the drug space. Bloomberg reported it to be $1 billion, citing a person familiar with the matter. Investors immediately stripped billions in value from brick-and-mortar pharmacy stocks. McKesson, Cardinal Health and AmerisourceBergen shares were all down after the news.
Earlier this week, Amazon announced that it hired respected physician and author Atul Gawande to head up the healthcare initiative it launched with Berkshire Hathaway and JPMorgan Chase in January with the goal of providing "high-quality and transparent health care at a reasonable cost".
Amazon adds that the closure of this transaction is subject to regulatory approvals and other conditions. But its expectation of over $100 million in 2018 revenue pales compared with larger rivals. Every year, Americans order 4 billion prescriptions and spend more than $360 billion on medication.
Experts said buying the company outright will allow Amazon to develop and scale a mail-order pharmacy business more quickly than if it had to develop the expertise from scratch.
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. "We're excited to see what we can do together on behalf of customers over time", said Wilke.
Some analysts played down the immediate threat. Evercore ISI analysts wrote that it's now "undeniable" that Amazon is entering the pharmacy industry, according to CNBC's Meg Tirrell.
PillPack was a 2014 finalist for Co.Design's Innovation By Design Awards.
Now, the online retail and tech giant has made perhaps its biggest foray yet into the field, hitting shares of retailers and distributors in the process. The two reached an agreement a month later.
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