Earlier this year, Amazon bought the online pharmacy company PillPack for approximately $1 billion. The hefty purchase price is partly attributable to the value of PillPack’s pharmacy licenses in all 50 states. PillPack also offers several uncommon features, such as delivering all of a customer’s medications in presorted daily pouches, which saves consumers with multiple prescriptions the trouble of carefully sorting their pills each day.
“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 statement. “PillPack is meaningfully improving its customers’ lives, and we want to help them continue making it easy for people to save time, simplify their lives, and feel healthier. We’re excited to see what we can do together on behalf of customers over time.”
PillPack is licensed to ship prescriptions to 49 states.
‘A Warning Shot’
Neil Saunders, managing editor of GlobalDetail Retail, expressed his views on the topic in an op-ed titled “Analysis: Amazon’s PillPack Acquisition Could Rattle Pharmacy Market,” which was published in Drug Store News. Saunders describes the acquisition as “a warning shot in what is about to become a major battle within the pharmacy space.”
“The most loyal part of their pharmacy customer base is the older consumer,” Saunders wrote. “Over the next ten years, this cohort will become a much less significant part of the market and this will leave drugstores exposed to younger shoppers who are more likely to use both Amazon and remote pharmacy services. There is a significant risk that drugstores will see a real erosion in pharmacy customer share, especially in urban and suburban areas where Amazon can quickly deliver.”
Devil in the Details
Peter Pitts, president and cofounder of the Center for Medicine in the Public Interest, says Amazon’s moves will cause less market disruption than many are predicting, because the company hasn’t yet shown any great understanding of the drug market.
“I don’t think that it is going to really have any initial impact, because Amazon doesn’t really understand, as far as I can tell, the intricacies of the health care marketplace,” Pitts said. “They don’t understand how products reach the consumer. … Amazon sees the health care marketplace as a growing area to do business that can be improved, that they can provide better services and still yield a handsome profit. And I think that’s true, but the devil is in the details.”
Saunders says Amazon’s market presence will benefit consumers. “Amazon’s entry into any market will put downward pressure on prices and upward pressure on costs as others try to match its service,” Saunders wrote. “This will result in weaker earnings for drugstores going forward.”
Pitts says Amazon will have to learn the intricacies of the health care industry before it can make a significant impact. “Health care is a complicated business, and just because you’re Amazon doesn’t make it any easier,” Pitts said. “It will be interesting to see how Amazon becomes educated about the health care marketplace and then how it chooses to apply trends to make that marketplace better, faster, and cheaper.”
‘Rethink Their Futures’
Saunders says pharmacies should change their approach and expand into services online pharmacies cannot offer.
“Drugstores need to rethink their futures,” Saunders wrote. “The addition of more services and positioning themselves as a destination for health advice and simple medical treatments are now more critical than ever. CVS has talked about this, but given Amazon’s advance, action rather than chatter is now required.”
Ashley Pappas ( [email protected] ) writes from Chicago, Illinois.