Amazon spends $1 billion on PillPack acquisition
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Amazon spends $1 billion on PillPack acquisition

Global Ecommerce giant Amazon is continuing to make strides into the healthcare market with a $1 billion acquisition of PillPack, an online pharmacy. The prescription drug industry is already in the process of transformation, and the threat of a new, global, competitor with Amazon’s considerable financial clout and business expertise has already dented other players. Walgreens Boots Alliance Inc. and CVS Health Corp., two stocks that could be under threat of an Amazon disruption after this acquisition, both saw their share prices fall by 9% on the back of the news.

Amazon’s share price has appreciated by 45%, year to date

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SOURCE: Yahoo Finance

Gist Healthcare, an industry consultancy, is just one of the companies watching to see how it all plays out. President Lisa Bielamowicz said: “This provides an avenue for Amazon to disrupt major pharmacy chains the way that they’ve disrupted booksellers, pet supplies, clothing and other big-box retailers.” Anyone who has witnessed Amazon’s incredible rise over the past few years will understand why drug sellers might be worried.

Amazon’s healthcare ambitions begin with the U.S. retail drugs market, which is worth an impressive 328.6 billion, as of 2016. The company’s founder and CEO, Jeff Bezos, has been voicing his concerns over the pharmaceutical industry for some time, bemoaning the rising costs consumers were having to deal with, and joining forces with fellow billionaires Warren Buffett and Jamie Dimon to form a healthcare venture which would reconfigure the way their respective companies dealt with employee healthcare.

PillPack could be a huge step forward in realizing Mr. Bezos’ plans. It has mail-order pharmacy licenses in all 50 states, and works with “most” of the major drug-benefit managers and Medicare Part D drug plans. It should position Amazon right at the center of what is unquestionably a very lucrative industry.

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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