Amazon's roughly $1 billion acquisition of online pharmacy PillPack marks
the retail giant's latest effort to push into the crowded health-care space and
follows its alliance with JPMorgan Chase and Berkshire Hathaway to
lower the cost of covering employees.
Amazon's might sent investors in competing companies
running for the hills, with shares of Rite Aid, Walgreens Boots Alliance and
CVS Health hard hit. Consolidation is a game plan for some, with Cigna in March saying it would buy Express Scripts for $52 billion and
Rite Aid and Albertsons working on a deal.
Amazon late last year was reportedly on the brink of deciding on whether to sell
drugs online. In April, it shelved a plan to sell drugs to hospitals through
its Amazon Business marketplace. Now, it's going all in.
For good reason: The U.S. health-care industry is a
convoluted mess. According to a recent study by the Commonwealth Fund, the U.S. health system is the worst
among high-income nations despite costing the most. The U.S. Centers for Medicare
and Medicaid Services estimates U.S. health spending came to nearly $3.5
trillion last year.
Amazon's intent for entering into the venture with JPMorgan
and Berkshire was to squeeze waste out of the cost of care by dispensing with
profit-sucking middlemen like pharmacies.
PillPack delivers medications in pre-sorted dose packaging,
coordinates refills and renewals and ensures that shipments are delivered on
time. The service is currently available in every U.S. state, except Hawaii.
The deal will let Amazon ship prescriptions overnight in a direct threat to the
$400 billion U.S. pharmacy industry.
The purchase echoes Amazon buying a a 40 percent stake in
Drugstore.com in 1999. This time, Amazon CEO Jeff Bezos is betting on a better
outcome, as Drugstore.com shares tanked during the dot-com bust and was
eventually shut down in 2016 after being purchased by Walgreens.
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