Economy

Pharmacy stocks are getting slammed after Amazon buys PillPack (AMZN, WBA)

Pharmacy stocks are getting slammed after Amazon buys PillPack (AMZN, WBA)

In 2016, the pharmacy benefits company Express Scripts Holding Co. threatened to drop PillPack from its list of approved vendors because of its focus on delivery over storefront retail. But U.S. pharmacy same-store sales fell. CVS reported prescription sales of US$59.5 billion a year ago, and Walgreens sold US$57.8 billion worth of drugs in its fiscal 2017.

Amazon's purchase of an online chemist that opens an immediate nationwide drug network in the USA has shaved billions off the value of three major pharmacy chains.

The announcement comes one week after Amazon, JPMorgan Chase and Berkshire Hathaway revealed the CEO of their new healthcare tech company. Those ties will give Amazon access to much of the prescription drug market in the U.S.

Amazon did not say how much it was paying for PillPack.

The deal for PillPack, which organizes and delivers prescription medications, will put it in head-to-head competition against existing drug retailers and distributors such as CVS Health and Walgreens Boots Alliance.

"This move signals just how big of a market opportunity there is to change the pharmacy landscape", Rea said in an email.

The No. 2 US pharmacy chain by market cap lost 9.9 percent on Thursday, becoming the day's biggest loser of the 30 stocks that comprise the Dow. Big packaged food stocks also took a hit.

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Some analysts played down the immediate threat Amazon poses.

But when Amazon announced today that it was buying PillPack, the deal immediately shook the industry.

These and other health care stocks rose a few months ago after reports that Amazon may not have been interested in selling prescription drugs. That effort ultimately failed and Walgreens purchased the money-losing startup in 2011.

PillPack utilises convenient packaging, modern technology, and personalised service in their pharmacy brand.

The Boston-based company said it raised $118 million from investors and venture funds since its launch in 2013.

Walmart Inc was looking to buy PillPack for under $1 billion, CNBC had reported in April. Now, that deal appears to have fallen through as Amazon came through with an undisclosed offer.

CEO Stefano Pessina said he was "pleased that, in what has been a challenging environment, we have again delivered solid earnings per share growth combined with healthy cash flow". The companies said the deal would have to clear regulatory hurdles before it is complete.