Amazon's PillPack Buy Rattles Drug Supply Chains

(RTTNews) - Online retail giant Amazon Inc. (AMZN) rattled the U.S. pharmacy industry on Thursday with the acquisition of online pharmacy PillPack Inc., which presorts medications and ships them to customers in 49 U.S. States, except Hawaii. The deal is expected to close during the second half of 2018. Terms of the acquisition have not been disclosed by Amazon, but reports value the transaction at around $1 billion. According to PitchBook, a SaaS company that delivers data, research and technology covering the private capital markets, PillPack was valued at $361 million as part of a 2016 funding. Though the takeover details are still deficient, the news of the e-commerce behemoth's acquisition wedged shares of the largest drug supply chains on Thursday, with Rite Aid (RAD) plummeting over 11%, Walgreens Boots Alliance (WBA) plunging 9.90% and CVS Health (CVS) descending 6.10%. Walmart Inc. (WMT) had reportedly been in talks to buy PillPack with an offer of just over $700 million, but Amazon snapped up PillPack for a $300 million more. Following the acquisition news, shares of Walmart tumbled about 1%. Meanwhile, Amazon shares were up 2.47% Thursday. PillPack CEO and co-founder TJ Parker, a 32-year old pharmacist, grew up watching people struggle with managing their medications - dozens of pill bottles, weekly trips to the pharmacy, and time-consuming DIY organization - while their pharmacists had limited resources to help. While finishing pharmacy school, TJ met Elliot Cohen through MIT's Hacking Medicine. They started PillPack to prove that managing medications could actually be simple. PillPack uses PharmacyOS, a software platform created entirely in-house, to help manage each customer's medications, coordinate refills and renewals, and make sure each shipment is sent on time, every time. PharmacyOS also enables real-time notifications and an online dashboard, so customers can control their shipments, refills, and copays. Customers can also email, text, or call their PillPack pharmacist any time to ask questions or clarify instructions. PillPack generated about $100 million in revenue last year. Though the number looks minuscule compared to Amazon's annual sales of about $177.9 billion, PillPack deal could help the e-commerce giant in inscribing a strong bridgehead in the pharmaceutical sphere. Earlier this year, Amazon, Berkshire Hathaway and JPMorgan Chase announced new healthcare joint venture and recently named Dr. Atul Gawande Chief Executive Officer of their newly-formed company to address U.S. employee healthcare. The move is aimed to improve health care for the three companies' more than a million combined U.S. employees and also at the same time make it more cost-effective. The healthcare joint venture and the PillPack deal may signal that Amazon is continuing to make a thrust into the $3 trillion US healthcare market.