Amazon Clicks the “Buy Now” Button on PillPack

Amazon.com, Inc. is no longer just talking about shaking up the U.S. health care system. Their jumping in with both feet.

The $1 billion purchase of online pharmacy PillPack makes it clear Amazon will be getting into the retail pharmacy industry. This will be sure to have an immediate impact on drug stores, drug suppliers, and the Pharmacy Benefit Managers (PBM) who often negotiate the pricing between wholesalers and insurance carriers. Specifically, Amazon’s move will present a direct threat to the largest pharmacy retail chains Walgreens Boots Alliance, Inc. (Walgreens) and CVS Health Corp. (CVS).

Amazon has proven to be a formidable force in the move from brick and mortar retailers to online purchasing. Booksellers, pet suppliers, clothing and big box stores have all fallen victim to the success Amazon has experienced over the last 15 years.

This move is really no surprise to industry leaders or, for that matter, individual consumers. The U.S. prescription drug expenses in 2016 were $328.6 billion according to data statistics provided by the federal government. This represents a more than $100 billion increase in expenses from 2006.

Recently, Amazon owner Jeff Bezos, Warren Buffett (Berkshire Hathaway) and Jamie Dimon (JP Morgan Chase & Co.) agreed to form a new venture that would attempt to control the cost of worker health benefits. While not related, Bezos is clearly interested in affecting the increasing expense trend in the healthcare market.

PillPack is firmly planted in the mail-order pharmacy market. They have licenses in all 50 states and relationships with most major PBM’s, including CVS and Express Scripts. They also work with most Medicare Part-D drug plans, meaning they’re servicing the fastest growing demographic for drug and supplement utilization. This will help Amazon quickly expand in the mail-order drug industry.

PillPack’s website (www.pillpack.com) claims their software automates many tasks, such as verifying when a refill is due, determining co-pays or co-insurance amounts, and confirming insurance status. Convenient packaging, pre-sorting dosages, and the availability of vitamins, over-the-counter medications, testing supplies, inhalers and creams are all touted as reasons to use PillPack. It remains to be seen how Amazon will integrate the PillPack customer dashboard into their website.

Will Amazon’s past success in driving down cost and eliminating competition be a benefit to employers and consumers? That remains to be seen. However, there’s no doubt that this move will continue to shake up an already transforming market in the U.S. economy.

(Thanks and credit to Robert Langreth and Zachary Tracer reporting from Bloomberg)