Amazon.com Inc. is making its way into the heart of the US health system. UU., Instantly stirring a prescription drug industry that is already in the midst of a wider transformation.
Insurance companies and drug benefits managers have come up with a series of deals in recent months designed in part to thwart a potential big stir in Amazon's health world. But the online retail giant's decision to buy PillPack online quickly accelerates the threat they pose to retailers, suppliers and intermediaries.
More immediately, the measure represents a formidable challenge for pharmacy chains, including Walgreens Boots Alliance Inc. and  CVS Health Corp., the two largest pharmacy chains in the US. UU Shares of Walgreens fell 8.5 percent at 10:49 a.m. in New York, while CVS shares lost 8.9 percent.
"This provides a way for Amazon to disrupt major pharmacies in the way they have disrupted booksellers, pet supplies, clothing and other large retailers," said Lisa Bielamowicz, president of consultancy Gist Healthcare.
Amazon will pay about a billion dollars for the Boston-based PillPack, according to a person familiar with the matter. The transaction is expected to close in the second half of 2018, according to a statement from the companies.
The United States market for prescription drugs is huge. In 2016, US consumers UU spent $ 328.6 billion on prescription drugs, according to data from the US government. UU CVS had $ 59.5 billion in prescription sales last year, while Walgreens sold $ 57.8 billion in its 2017 fiscal.
Amazon CEO Jeff Bezos, after creating his original idea at the retailer in The world's largest line, it has been using engineering and acquisitions to infiltrate a growing number of companies. It took over the $ 800 billion grocery industry with the purchase of Whole Foods last year, and entered consumer electronics with the creation of the Kindle e-reader and the Echo voice-controlled speaker.
Bezos has already pointed out his frustration with a health care system characterized by rising costs for consumers and businesses, sometimes poor results and unnecessary complexity. Earlier this year, he and CEOs Warren Buffett and Jamie Dimon of Berkshire Hathaway Inc. and JPMorgan Chase & Co., respectively, agreed to form a new company to reshape the way companies handle the health benefits of workers. . The entity recently hired the famous surgeon and health journalist Atul Gawande to lead the effort.
PillPack has mail-order pharmacy licenses in all 50 US states. UU., Which could allow Amazon to expand rapidly. PillPack also has relationships with most of the major drug benefit managers, including Express Scripts and CVS, and says it works with most Medicare Part D drug plans. Those links will give Amazon access to much of the US prescription drug market. UU
PillPack sells prescription prescriptions and delivers them to clients at home. The closely-held company has software that automates many tasks, such as verifying when a refill expires, determining co-payments and confirming insurance. That eliminates much of the manual work that pharmacists are often charged with now.
The agreement follows months of speculation about Amazon's plans to enter the pharmacy or the drug distribution business. Despite the retailer's vast reach, entering the market presented a daunting logistical challenge in terms of licensing and dealing with a range of private and government payers. The acquisition of PillPack networks helps Amazon overcome these obstacles.
Michael Rea, CEO of Rx Savings Solutions, said PillPack could transform the industry and that employers and health plans would benefit from the agreement, which he called a "sign of the times."
"This move indicates how big of a market opportunity there is to change the pharmacy landscape," Rea said in an email.
Liquidation in pharmacy stocks evoked the swoon of the food industry that resulted in June 2017 when Amazon said it was buying Whole Foods Market Inc. Kroger Co., the largest supermarket chain in the US. US, lost $ 2 billion in market value annihilated in one day. Large stocks of packaged foods were also successful.
"When Amazon sneezes, everyone else catches a cold," said Joseph Feldman, an badyst at Telsey Advisory. "And I think that's more likely than what you're going to see today."
Long Time Coming
Sales of prescription drugs are largely intertwined with groceries and personal items like make-up and shampoo and Amazon already sells latex glove packs, bed pads and syringes in bulk. Recently he also started selling medical devices and instruments.
Bezos has been thinking about the drug business for almost two decades; in 1999, Amazon bought a stake in Drugstore.com. That effort finally failed and Walgreens bought the startup that loses money in 2011 and finally closed it.
Pharmacist TJ Parker and computer scientist Elliot Cohen founded PillPack in 2013 after meeting in a medical technology program at the Mbadachusetts Institute of Technology. The company raised more than $ 118 million from branded investors such as Accel, Sherpa Capital and New York rapper Nas & # 39; s Queensbridge Venture Partners.
Parker will remain at PillPack after the deal is closed, according to a person familiar with his plans.  A financing round of September 2016 valued the start-up at around $ 360 million, according to the PitchBook venture capital database. In April, it was said that Walmart Inc. was in talks to buy the company.
For now, Walgreens indicated that it was in no hurry to find an agreement to respond to Amazon, despite the damage to its stock. In a earnings conference call, Walgreens CEO Stefano Pessina faced multiple questions from badysts about the PillPack agreement.
"It's a statement of intent from Amazon," said Pessina.
Said Walgreens knew that PillPack was for sale as "It had been on sale for a while", but that the retailer would not make deals based on emotions or make moves that could destroy the value. Pessina insisted that physical pharmacies would continue to be "very important".
The fall of Walgreens shares weighed on the Dow Jones Industrial Average, which this month added the stock to its 30-company index, replacing General Electric Co.  – With the help of Spencer Soper, Craig Giammona, Gerrit De Vynck, Emily McCormick and Jared S Hopkins
( Updates stock prices in the third paragraph An earlier version of this story corrected the day in the second paragraph )