Amazon buys Pillpack, another major health care move for Jeff Bezos’s company.
Amazon, maker of many waves in the health care industry these days, just announced another stunner: The internet titan is buying Pillpack, an online pharmacy start-up, putting the drug distribution chain on notice.
CNBC reported Thursday that Amazon would acquire Pillpack, which has been around for five years and says it is licensed to operate in 49 states, for an undisclosed price. The news was considered so disruptive that shares for Walgreens, CVS, and Rite Aid immediately lost $11 billion in value.
One of the big questions for Amazon once it signaled its desire to get into health care has been how it would navigate the industry’s hopelessly complex regulatory world. The answer we got on Thursday: Just buy up a much smaller company that has already done the leg work.
“The regulatory complexity of getting licenses in every state, you can take care of that in one fell swoop,” Craig Garthwaite, a professor at Northwestern University’s Kellogg School of Management, told me.
Amazon also edged out Walmart, one of its top competitors in the business-monolith-cum-health-care-company space, which had reportedly been looking to purchase Pillpack. Here is a quick primer on Jeff Bezos’s new toy from STAT’s Ed Silverman:
PillPack, a privately held startup, has attracted substantial interest because the company boasts it can make it easier and faster for consumers to get a prescription filled than at corner drugstores. The five-year-old company manages multiple prescriptions for customers by pre-sorting, packaging, and delivering drugs with a round-the-clock staff that can be contacted online or by phone. Its pharmacy is based in Manchester, N.H., and its business operations are located in Somerville, Mass.
Health industry watchers on Twitter did not hold back in their assessment of the deal.
Wow. Amazon acquiring PillPack is going to totally gut all the retail pharmacies and online drug delivery companies too. It’s like what Uber did to taxis and what Netflix did to Blockbuster. https://t.co/bbuZ926qKf
— Eugene Gu, MD (@eugenegu) June 28, 2018
Amazon is acquiring both all of those operating licenses and, if it wants, the Pillpack software that already gave the company its estimated $1 billion valuation. We’ll see about that — if there is anything Amazon has perfected, it’s online retail.
This is a smart combo. @Pillpack doesn’t just have pharmacy licenses but also software that can handle complex orders, so Amazon can focus on scale, delivery, etc w/o having to learn pharmacy from scratch. https://t.co/9ozMiK1jV0
— Caroline Chen (@CarolineYLChen) June 28, 2018
Mail order pharmacies are hardly new, of course, so it’s hard to say for sure how much Amazon can really disrupt the drugstore game. The big question Garthwaite had: Do the operating licenses that Amazon bought allow it to easily deploy its same-day delivery? CVS and Walgreens just made moves to do so.
Until recently, there was usually a gap between a patient ordering a drug and when its delivery through a mail-order pharmacy. That certainly works for some patients, especially those who take drugs frequently and on a regimented basis.
But if Amazon wants to start selling medications to the parents who need antibiotics for their sick kids — the real growth opportunity here, you might think — then they need same-day delivery.
“Same-day delivery is how Amazon makes mail order competitive with a regular pharmacy,” he said. “If Amazon can do that, it makes them a bigger player in pharmacy.”
The other option would be to add a physical retail component — say, at the hundreds of Whole Foods Markets that Amazon recently took over. But at that point, you’re looking at less disruption and instead just another grocery store with a pharmacy.