Amazon.com is about to wreak havoc in yet another area of retail: drugstores.
The company said on Thursday morning it was buying online pharmacy PillPack in a deal that will instantly give Amazon a platform through which to sell pharmaceuticals.
The news sent the shares of drugstore giants CVS Health (CVS), Walgreens Boots Alliance (WBA), and Rite Aid (RAD) plunging between 8% and 10%.
With Amazon’s (AMZN) firepower behind it, PillPack can upend how customers buy and receive their prescription medications. The company pre-sorts pills into date- and time-stamped packages for patients, making it easier for them keep track of them—a key consideration for many patients, particularly those taking multiple prescriptions as many seniors do. Its software helps drugstore manage refills and offers an online dashboard for patients.
“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” Jeff Wilke, Amazon CEO for Worldwide Consumer, said in a statement.
Amazon did not say how much it is paying for PillPack, but the online pharmacy appears to have been the object of a bidding war: CNBC reported in April that Walmart (WMT), the fourth largest filler of prescriptions in the U.S., was trying to buy it for about $1 billion.
CVS recently announced it had landed a deal with the U.S. Postal Service to offer customers home delivery within a day or two, a move clearly intended to stay ahead of anticipated competition from Amazon. CVS, which is buying health insurer Aetna, is likely to add health services to many of its stores as it looks to keep its position in the health care market.
The acquisition confirms market speculation that Amazon wanted to jump into the pharmacy or drug-distribution business. The deal is expected to close in the second half of year, the companies said.
Walgreens, which was recently added to the Dow Jones Industrial Average index, saw shares tank on the PillPack news, as well as weak U.S. retail store results. Its CEO, Stefano Pessina, downplayed the Amazon threat on Walgreen’s earnings call with Wall Street analysts, saying the “pharmacy world is much more complex than just delivering certain pills.”
