The pharma sector is about to witness a big disruption, as leading online retailer Amazon.com Inc. (AMZN) has made new announcements over the last 24 hours. Amazon has acquired PillPack, an online pharmacy service that allows customers to purchase medications in pre-made doses. Though precise details of the transaction were not made public, a source familiar with the matter mentioned the deal to be “just under $1 billion,” reports TechCrunch. Amazon rival Walmart Inc. (WMT) was also a contender to buy PillPack but lost out to Amazon's better offer.
Closely following the PillPack purchase, Amazon announced a program that will include prescription deliveries through its Prime membership program. Essentially, one can now have medications, and other goods, delivered to the doorstep via Amazon Prime. With its large scale, delivery and logistics expertise, the PillPack acquisition combined with inclusion in Prime service has the potential to revamp the way people purchase drugs.
Amazon’s dominance has support from another initiative. It is launching a program that allows one to start a Amazon delivery business. It involves delivering Amazon Prime packages in Amazon-branded vans, all for a $10,000 capital investment. If the program succeeds in attracting a significant number of such “delivery agents” to Amazon, you can have your drugs within hours. (See also: Amazon Launches Its Own Line of OTC Drugs.)
Amazon's Threat to Other Rx Players
CVS Health Corp. (CVS), a leading American retail pharmacy and health care company, last week announced similar program for next-day drug delivery for a standard price of $4.99 per delivery. However, Amazon’s offer, inclusive in the standard annual Prime subscription fee, is expected to be a killer. Amazon also offers same-day delivery across many locations, which is another point where it will score over CVS.
"To me that's too little too late," said Arielle Trzcinski, a senior analyst at Forrester who covers health care and technology, to CNN Money on CVS’ initiative. "They're going to charge people per delivery."
The threat is much worse for other brick-and-mortar retail pharmacy stores. Amazon CEO and founder Jeff Bezos is betting that customers (oftentimes suffering patients) will be better off having their drugs delivered to their doorsteps instead of visiting the nearest drug store and standing in line in an unwell condition. "This is going to have serious implications for the brick-and-mortar retail pharmacies," added Trzcinski .
Though it appears Amazon has commanded the upper hand at the moment, there are other views. CNN Money quoted Lawton R. Burns, a professor of health care management at the University of Pennsylvania's Wharton School, who believes that health care is a very complex business that "doesn't change that rapidly," adding, "It gives me pause thinking about what's going to drastically change here." (See also: Amazon Offers More Prime Perks at Whole Foods.)