Amazon is making a foray into an online pharmacy. Amazon is buying PillPack, an online pharmacy that allows customers to buy drugs in pre-made doses.
Amazon, only a week after announcing with Warren Buffet and JP Morgan Chase’s Jamie Dimon the new chief executive officer of their healthcare venture, is making a foray into an online pharmacy. Amazon is buying PillPack, an online pharmacy that allows customers to buy drugs in pre-made doses.
In an interview in early June, FJ Parker, co-founder of PillPack, told Business Insider, “When I started PillPack there was almost no startup activity in pharmacy. Now there’s a ton of activity and that’s super exciting, it’s a $400 billion market domestically, and I think there should be a number of different solutions for different types of customers.”
Amazon has not indicated how much is it paying for the company. Reportedly, PillPack was in talks with Walmart a few months ago for an asking price of $1 billion. In 2016, PillPack had a valuation of $361 million.
TechCrunch noted, “The move (and that reported valuation hike) signal how heated the e-health market is becoming, and also how Amazon views it as a key frontier in its bid to be the go-to place for anything a consumer (or medical organization) might want or need in the area of healthcare.”
In a statement, Jeff Wilke, Amazon’s Worldwide Consumer chief executive officer, said, “PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology. 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.”
In January, Buffett, Amazon’s Jeff Bezos, and JP Morgan’s Dimon announced they were creating a joint venture to cut healthcare costs and improve services. Although many view this as likely to have an impact on the broader U.S. healthcare market, it appears to be focused primarily on solving the three companies’ internal healthcare issues. Together they employ 840,000 to 1.2 million people worldwide. Last week they announced Atul Gawande as chief executive officer of the joint venture. Gawande practices general and endocrine surgery at Brigham and Women’s Hospital and is a professor at the Harvard T.H. Chan School of Public Health and Harvard Medical School. He is also founding executive director of Ariadne Labs, a health systems innovation center.
It’s not clear if the acquisition of PillPack is related to this joint venture, although it wouldn’t be surprising if it became a component of it. In August 2017, Goldman Sachs published a 30-page report on how Amazon could break into the prescription drug market. Written by five analysts, the report noted that at that time Amazon had not explicitly stated its interest in entering the prescription drug market, but it had developed the secretive 1492 group, which was reportedly working on medical devices.
The report cited five key points.
- Amazon could start by partnering with a pharmacy benefits manager (PBM).
- Its presence in the prescription drug market would likely speed drug delivery and at-home delivery. The acquisition of PillPack would seem to land squarely into this category.
- Amazon could become an online pharmacy, retail and online pharmacy, integrating PBM and online pharmacy. Again, the same as point two.
- Demographic challenges. Amazon’s customers tend to skew younger and healthier than the age group that takes the most prescription drugs.
- The possible pushing of the use of the Echo in the clinical setting. The report stated, “Imaging seeing a virtual doctor on your Amazon app, having it prescribe you a certain medication, and then tapping a ‘buy now’ button—all without leaving your home.”
The PillPack acquisition clearly confirms that the Goldman Sachs report was largely accurate, and that the world’s largest retailer has decided to add an online pharmacy. How far it will expand those services and what kind of impact it will have on the wider pharmacy market remains to be seen. Amazon routinely disrupts any market it enters, whether books or broader retail, and disrupting pharmacy could disrupt the broader healthcare market, whether positively or negatively is unknown at this point.
Lorrie Carr, chief commercial officer of ZappRx, and previous divisional vice president of enterprise specialty sales and product management at Walgreens, was quoted in MedCityNews in 2017, saying, “One is that Amazon may displace current pharmacies given their technological capabilities and connection to consumers. The other is that the pharmacy environment is too complex for them to be as disruptive as they’ve been in other industries. Selling to consumers is very different from selling to patients, in terms of the regulatory environment and the complexities of ‘who pays for what.’”
