Amazon Enters the Pharmacy Market

Amazon Enters the Pharmacy MarketOn June 28th, Amazon announced that they signed an agreement to buy PillPack, an online pharmacy that was started in 2013. PillPack provides prepackaged doses of multiple medications labeled by date and time, coordinate refills, provide patients with an online dashboard which can be accessed through an iPhone app, have pharmacists available 24/7, and offer free delivery. Customers pay their copay and the cost of any over the counter medications such as vitamins or any supplies that they want to purchase.  Physicians can send new prescriptions directly to PillPack, which functions like any other pharmacy.

After much speculation, we now know how and when Amazon will enter the prescription drug industry.  A strict regulatory environment along with cost challenges has prevented many companies from entering the pharmacy business. Buying PillPack solves these issues, since PillPack is already licensed to ship drugs in 49 states.

However, there are still challenges. For example, most prescriptions are filled at pharmacies and the demographic of PillPack is much older than current Amazon customers. Perhaps, Amazon hopes to attract older demographics who will then also shop on Amazon for other purchases. Amazon’s experience in online sales and existing customer base could attract more customers to try purchasing drugs online.

Acquiring PillPack is likely just the first step in Amazon’s entry into healthcare as they had previously announced that they are planning to create a healthcare company with Berkshire Hathaway and JPMorgan Chase.

Will Amazon be successful in online pharmacy?

Investors appear to think so, as the stock price of Rite Aid, Walgreens Boots Alliance and CVS Health dropped the day the deal was announced, while the price of Amazon’s stock went up. The pharmacy deliveries will be monthly recurring purchases, providing consistent revenue stream for Amazon.

Amazon is good at lowering prices for consumers. Can they do the same for certain prescriptions? While many people pay copayments for prescriptions, those on consumer driven plans pay the cost if they haven’t met their deductible. Amazon and PillPack may provide them a lower cost alternative. Savings at the pharmacy could impact the cost of health insurance coverage. Will we use Prime to purchase prescriptions and other items and be reminded to take our medications through Alexa? We may have that answer soon.

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