On Tuesday, CVS Health Corp. (CVS) announced plans to roll out delivery of prescription drugs and some over-the-counter medicines to consumers' homes. As the drugstore chain seeks to protect itself from Amazon.com Inc.'s (AMZN) push into the industry, the company has taken preemptive measures to protect its turf, such as a proposed a $66 billion bid to merge with health insurer Aetna Inc. (AET).
CVS will enlist the U.S. Postal Service for its new home delivery service, which will pick up prescriptions at stores and bring them directly to customers' doorsteps within one or two days. Each delivery will cost $4.99, and can include over-the-counter products such as vitamins, cold and flu medicines, face wash or aspirin.
Drugstore Chain Aims to Revive Sales as Foot Traffic Falls
The move will help CVS revamp sales as foot traffic falls at its roughly 9,800 brick-and-mortar locations and hedge against new competition not only from Amazon but other retail giants like Walmart Inc. (WMT) and venture-backed home delivery startups such as PillPack Inc. and Capsule Corp. Last year, Target Corp. (TGT) shelled out $550 million to buy Shipt Inc., a grocery delivery startup with offices in San Francisco and Birmingham, Alabama. (See also: Health Insurance: New Front in Walmart Vs. Amazon?)
Seattle-based e-commerce and cloud computing giant Amazon has disrupted retailers across industries with its free two-day shipping. The tech titan, which has already doubled down on the medical supplies market, has reportedly been weighing its own prescription drug offering. The company already sells private label over-the-counter drugs on its global platform through a partnership with Perrigo and has received pharmacy licenses in a handful of states. As a result, Amazon fears have dragged on shares of traditional drugstores, including CVS and its rivals Walgreens Boots Alliance Inc. (WBA) and Rite Aid Corp. (RAD).
In April, CNBC reported that Amazon had taken a step back in its pursuit of the pharmacy space, ending an initiative to sell and distribute pharmaceutical products through Amazon Business. Investors are anticipating more developments from Amazon's partnership with Berkshire Hathaway Inc. (BRK.A) and JPMorgan Chase & Co. (JPM) to form a joint venture aimed at reducing costs of health care for employees. (See also: Amazon Halts Plan to Sell Pharma to Hospitals.)