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Amazon.com Inc. buys its way into the heart of the American health care system, instantly shaking the already-changing prescription drug industry
Insurance companies and drug managers have concluded a series of transactions in recent months, designed in part to thwart Amazon's huge potential in the world of health. But the decision of the online sales giant to buy PillPack online pharmacy is rapidly accelerating the threat to retailers, suppliers and middlemen.
The move represents a real challenge for pharmacy chains, including Walgreens Boots Alliance Inc. 19659005] CVS Health Corp., the two largest pharmacy chains in US stocks Walgreens sank 8.5% in 10:49 in New York, while CVS shares lost 8.9%.
"Amazon can disrupt large pharmacies According to Lisa Bielamowicz, president of consulting firm Gist Healthcare, Amazon will pay about $ 1 billion for PillPack based in Boston, according to a press release. The transaction is expected to be concluded in the second half of 2018, according to a statement of companies
The US market for prescription medicine is vast.In 2016, US consumers spent 328, $ 6 billion in prescription drugs, according to US government data. "Last year, CVS had sold $ 59.5 billion worth of prescription drugs, while Walgreens sold for $ 57.8 billion worth of prescription drugs. drugs in 2017.
Jeff Bezos, the CEO of Amazon, used his own online engineering store and acquisitions to infiltrate a growing number from companies.It embarked on the $ 800 billion food industry through the purchase of Whole Foods last year and it 's $ 40 billion. is launched in consumer electronics with the creation of the Kindle e-reader and the Echo speaker.
Bezos has already reported his frustration. a system of care characterized by increasing costs for consumers and businesses, sometimes poor results and unnecessary complexity. Earlier this year, he and his co-CEOs Warren Buffett and Jamie Dimon of Berkshire Hathaway Inc. and JPMorgan Chase & Co., respectively, agreed to form a new company to reshape the way companies handle workers' health benefits. . The entity recently hired the famous surgeon and health journalist Atul Gawande to lead the effort
Instant Access
PillPack has postal pharmacy licenses in all 50 US states, which could allow at Amazon to grow quickly. PillPack also has relationships with most leading drug managers, including Express Scripts and CVS, and says it works with most Medicare Part D drug plans. These links will allow Amazon to access a large portion of the prescription drug market in the United States.
PillPack sells pre-sorted packages of prescription drugs, delivering them to home customers. The company with limited participation has software that automates many tasks, such as checking when a reload is due, the determination of the co-pays and the confirmation of the insurance. This eliminates much of the manual work that pharmacists often face now.
The pact follows months of speculation about Amazon's plans to enter the pharmacy or drug distribution sector. Despite the broad reach of the retailer, entry into the marketplace presented a daunting logistical challenge in terms of licensing and processing with a range of private and government payers. The acquisition of PillPack networks helps Amazon overcome these obstacles.
Michael Rea, CEO of Rx Savings Solutions, said that PillPack could transform the industry and that employers and health plans would benefit from this deal, which he calls a "sign of the times."
"This decision indicates how much it is possible to change the landscape of pharmacy," Rea said in an e-mail
The sale of drugs in pharmacies recalled that of the food industry in June 2017 When Amazon announced that it was buying Whole Foods Market Inc., Kroger Co., the largest supermarket chain in the United States, lost $ 2 billion in market value in one day. "When Amazon sneezes, everyone gets a cold," said Joseph Feldman, badyst at Telsey Advisory. "And I think it's more likely that otherwise what you're going to see today."
Long Time Coming
Prescription drug sales are largely related to groceries and personal items like makeup and shampoo. packs of latex gloves, bed cushions and syringes. He has recently started selling medical devices and instruments.
Bezos has been thinking about the pharmaceutical industry for nearly two decades. In 1999, Amazon bought a stake in Drugstore.com. This effort eventually failed and Walgreens bought the start-up losing money in 2011.
Pharmacist TJ Parker and computer scientist Elliot Cohen founded PillPack in 2013 after meeting with in a medical technology program at the Mbadachusetts Institute of Technology. The company raised more than $ 118 million from branded investors, including Accel, Sherpa Capital and Queensbridge Venture Partners of rapper New York Nas.
Parker will remain with PillPack after closing the deal, according to one person familiar with his plans. ] A September 2016 round of funding has estimated start-up at about $ 360 million, according to the PitchBook Venture Capital Database. In April, Walmart Inc. was in talks to buy the company
Standing Firm
For the time being, Walgreens indicated that it was in no hurry to find an agreement to respond to Amazon, despite damage to its stock. During a conference call on the results, the CEO of Walgreens, Stefano Pessina, was confronted with several questions from badysts about the PillPack agreement
"It's about 39; a statement of intent of Amazon ". "It had been on sale for a while," but that the retailer would not do business based on emotions or make movements that could destroy the value. Pessina emphasized that physical pharmacies would continue to be "very important".
The fall of Walgreens shares weighed on the Dow Jones Industrial Average, which added the title to its index of 30 companies this month, replacing General Electric Co. [19659002] – with the help of Spencer Soper, Craig Giammona, Gerrit De Vynck, McCormick Emily and Jared S Hopkins
( Stock price updates in the third paragraph.) An earlier version of this story corrected day to the second paragraph . )
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