Amazon edges closer to retail pharmacy with purchase of PillPack

Although a drop in stock value can be a temporary effect that is reversed by later developments, the Wall Street reaction to Amazon’s announcement shows the effect of its power to create its own ordering of retail markets. The Amazon action is, relatively speaking, small: PillPack is a mail-order pharmacy grossing some $100 milllion annually at the time of the acquisition, and is being purchased (reportedly) for $1 billion. The US retail pharmacy business is over $400 billion, and there are some 67,000 brick-and-mortar pharmacies currently in operation. PillPack’s main business is producing a 30-day supply of chronic-care meds, packaged for convenient everyday dispensing. (This business has been tried by various firms in the past and has not driven substantial change in retailing.)

With its purchase, Amazon gains pharmacy licenses in 49 states (excluding Hawaii); previously it had applied for healthcare products distribution permits in several states. It has an existing business supplying hospitals and healthcare facilities with products.

The larger context, of course, is Amazon disrupting existing relationships among retail pharmacies, drug wholesalers, pharmacy benefit managers and, ultimately, pharma manufacturers. It has also joined in a multi-corporation effort to alter reliationships between employers, insurers and healthcare providers. In pharma dispensing, multiple distribution channels exist, with different pricing structures, but ultimately arrive at medications provided to patients. Earlier in June, CVS Health (which is both a retailer and a PBM) struck a deal with the US Postal Service to provide rapid delivery of prescriptions to patients (something that Amazon already does with its consumer products), but this “last mile” aspect of drug distribution is just one of many steps involving the timeliness of delivery, drug availability and, especially, the prices paid by both patients and insurers