Dive Brief:
- Amazon announced Thursday it has entered a definitive merger agreement to acquire online pharmacy PillPack, which focuses on delivering individualized rolls of pre-sorted medicines to people who manage multiple daily medications.
- The financial details of the deal were not disclosed, and it is subject to regulatory approval. Amazon and PillPack say they expect the deal to close during the second half of 2018.
- The move by Amazon comes a week after CVS Health announced it would be expanding its prescription drug delivery platform nationwide. The deal suggests Amazon is still looking to make a splash in the space, despite reports that the tech company was pulling back from plans to distribute drugs itself.
Dive Insight:
The move is the latest example of Amazon's intent to try to disrupt the healthcare sector. Leerink analyst David Larsen said it came earlier than expected, "as the market, in our view, had recently believed [Amazon] had delayed plans to enter the U.S. pharmacy market, and at least temporarily shelved plans to enter the hospital distribution space."
Shares of retail pharmacy companies such as Rite Aid, CVS Health and Walgreens Boots Alliance were down more than 8% during pre-market trading Thursday morning.
Amazon said the PillPack deal will give it the experience needed to enter the pharmacy space. Many experts had warned that barriers to entry, such as the need to contract with pharmacy benefit managers, were daunting challenges for Amazon, but acquiring PillPack may solve some of those problems.
Earlier this year, media reports said Walmart was talking to PillPack in a deal worth under $1 billion.
"PillPack's visionary team has a combination of deep pharmacy experience and a focus on technology," said Jeff Wilke, Amazon CEO Worldwide Consumer, in a press release.
PillPack is currently licensed to ship prescriptions to 49 states, and can fill schedule III, IV and V medications, according to the company. It currently does not ship to Hawaii and cannot fill schedule II prescriptions.
The online pharmacy noted it currently contracts with several major pharmacy benefit managers, including CVS Caremark, Express Scripts, Optum Rx, Cigna, Aetna and others.
PillPack investors include Accel Partners, Atlas Venture, Menlo Ventures and others, according to the company. In September 2016, the company completed its $55 million Series D funding round, according to Crunchbase.
The retailing giant, along with Berkshire Hathaway and J.P. Morgan, recently named Atul Gawande as CEO of their shared business venture aimed at cutting down healthcare costs for their employees.
