Amazon.com Inc said on Thursday it would buy small online pharmacy PillPack, a move that will put the world's biggest online retailer in direct competition with drugstore chains, drug distributors and pharmacy benefit managers.
The deal's potential to disrupt major players across the drug supply chain nationwide prompted a sell-off in shares of possible rivals, while sending Amazon shares up 2.5 percent.
PillPack supplies pre-sorted prescription drugs and other services to people who take multiple medications, a growing market as the U.S. population ages and requires treatment for multiple complex, chronic conditions.
Amazon is vying for a share of what is a more than $450 billion total U.S. prescription drug market, according to research firm IQVIA. Although PillPack expects sales to exceed only about $100 million this year, Amazon's huge customer base and existing shipping infrastructure could allow the company to scale up quickly.
Amazon could also negotiate directly with pharmaceutical companies, giving them the ability to offer cheap generic drugs even to customers without health insurance, according to industry experts. But it will face deeply entrenched competition dominated by pharmacies run by CVS Health, Walgreen Boots Alliance and Walmart Inc, and pharmacy benefits provided by CVS, Express Scripts UnitedHealth Group.
"Amazon's acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space," said Neil Saunders, managing director of GlobalData Retail.
The value of the deal was not disclosed. Bloomberg reported it to be $1 billion, citing a person familiar with the matter.
Pharmacy chains and drug wholesalers lost about $14 billion in market value on Thursday, while Amazon gained about $5.5 billion.
Shares of CVS closed down 6.1 percent, while Walgreen fell 10 percent. Shares of drug wholesalers McKesson Corp, Cardinal Health and AmerisourceBergen all fell.
This is a pretty damn big deal. I know some chains have been shitting the bed afraid this day would come.
Itll be interesting to see what happens from here
Also tagging medical/future medical users Im aware of