Amazon Enters the Pharmacy World with Acquisition of PillPack

Today, you can order just about anything you need from the convenience of your home with Amazon. The massive online retailer is taking it a step further by entering into the drug dispensary business with their recent purchase of PillPack.

Amazon announced their acquisition of the online pharmacy PillPack, which prides itself on customer service by offering presorted medication, and home delivery, in a press release. The announcement came just months after reports that Amazon was backing off plans for large-scale drug distribution and had been struggling to do business with hospitals. Additionally, Amazon had also reportedly run into some infrastructure and logistical issues around specialized products, such as requiring refrigeration across the distribution infrastructure and special handling requirements.

“PillPack makes it simple for any customer to take the right medication at the right time, and feel healthier,” TJ Parker, co-founder, and CEO of PillPack said in a press release about the acquisition. “Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the U.S. who can benefit from a better pharmacy experience.”

Amazon and PillPack signed into a definitive merger agreement in which Amazon will acquire the pharmacy upon transaction finalization sometime in the next 6 months, according to the press release.

PillPack aims to create top notch care for customers who take several daily prescription medications. The online pharmacy delivers prescriptions presorted by dose, organizes prescription refills and renewals, and ensures patients receive their prescriptions on time, according to the press release.

“PillPack’s visionary team has a combination of deep pharmacy experience, and a focus on technology,” said Jeff Wilke, Amazon CEO Worldwide Consumer. “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.”

Amazon announced the purchase of PillPack shortly after CVS launched their nationwide prescription delivery service. Although prescription delivery is not a new concept, the idea of Amazon entering the pharmaceutical space likely has broad-reaching implications for the business of pharmacy. As Pharmacy Times' Editor Troy Trygstad noted in a commentary posted earlier this spring, the process of how medications are delivered will evolve, as delivery methods have with other retail businesses.

"It is important to note that the method of medication distribution to the end user continues to evolve and follow trends well under way in the larger retail sector," he wrote.

News of the acquisition sent shares of several pharmacy brands plunging today, with CNBC reporting "3 pharmacy stocks for Rite Aid, Walgreens, and CVS collectively lost $11 billion in market value on Thursday alone."

Meanwhile, reactions from pharmacists and others in the industry were mixed, with many taking to social media to discuss the issue. One commentator on the Pharmacy Times Facebook page called the acquisition "scary" for retail pharmacists.

Dan Steiber, RPh, who is the Editor in Chief of Pharmacy Times' sister publication, Specialty Pharmacy Times, commented: "Pill Pack is primarily a home delivery mail-order pharmacy, which distinguishes itself by customizing the patient’s dosages through the use of pre-labeled pouches, which have the name of the drug and the time in which they must be taken, similar to what has been used in long-term care and by some specialty pharmacies for many years. To work best, it seems that it is important that the patient use the Pill Pack service for ALL of their medications or else they’ll have some products in supplied pouches and other in the more traditional vial, which seems to defeat the purpose."

Steiber continued that the acquisition may have some implications regarding Prescription Benefit Managers (PBMs).

"All of the PBM’s of consequence have their own mandatory mail order pharmacy service, however some states mandate through “Freedom of Choice” laws that a patient might continue to have access through a local walk in retail pharmacy, as long as that pharmacy will accept the same pricing as mail-order. The intent is to allow the patient to have a face- to-face relationship with their local pharmacy, not access to another competing mail-order pharmacy. Traditionally PBMs will not allow a patient to obtain their prescriptions from a mail-order pharmacy that may compete with their own. In Pill Pack’s short history they have already been challenged by a large PBM, however after a fairly public dispute the PBM allowed them to have access. My assumption is that Pill Pak was not considered a threat to the PBM on a stand-alone basis. The bigger question is how might PBMs feel about allowing access to Pill Pack now they are part of Amazon, a great organization, but one known for putting a huge dent in the retail space? Given the huge decline in the valuation of large retail chains since the announcement, I suspect that PBMs will view them as a threat."

Steiber asked the question, where does that leave Pill Pak should the payer access side collapse?

"In today’s market, over 90% of prescription filled are for generics products and Pill Pak’s website states that they substitute for generics as does any other pharmacy. Many community pharmacies today offer $4 a month generic prescriptions...is this the play?" he asked. "Similar to what Wal-Mart did when they upset the market in 2006 with their $4 generics, perhaps that is Amazon’s plan, sell generics and sell complimentary health care and other products leveraging orders with other Amazon items. Use pharmacy as a 'loss leader.'"