Health Care

Walgreens plays down Amazon pharmacy entry, but investors spooked

Walgreens plays down Amazon pharmacy entry, but investors spooked”

On Thursday, Amazon announced it had bought PillPack, an online pharmacy for about $1 billion, a source briefed on the deal told The New York Times.

Amazon is acquiring PillPack, an online pharmacy licensed to sell prescription drugs in all US states, excluding Hawaii.

PillPack, for the uninitiated, is an online pharmacy that makes it easy for people who take several different prescriptions a day. Walmart Inc. (WMT) had reportedly been in talks to buy PillPack with an offer of just over $700 million, but Amazon snapped up PillPack for a $300 million more. Stefano Pessina, the boss of Walgreens Boots Alliance, admitted: 'Yes, it is a declaration of intent from Amazon'.

Shares of drug wholesalers, like those of AmerisourceBergen, McKesson and Express Scripts, also took a smaller hit following news of the deal. "We're excited to see what we can do together on behalf of customers over time", said Wilke.

The company picked up independent pharmacy PillPack for an undisclosed amount on Thursday, allowing it access to PillPack's pharmacy distribution system created to make getting prescriptions simpler for patients.

The acquisition follows months of rumors that Amazon was eyeing consumer healthcare services, particularly the pharmacy space.

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The iShares U.S. Healthcare Provider ETF, or IHF, absorbed over $255 million worth of trades on Thursday, the most in nearly a decade and a whopping 46 times the average daily turnover for the past year.

Amazon recently announced that it had teamed up with JPMorgan and Berkshire Hathaway for a healthcare joint venture and just a week back, the partners appointed a CEO for the venture.

They have more experience in health care than Amazon, and they have access to patients that Amazon doesn't have through contracts with insurers and pharmacy benefits managers.

The deal's potential to disrupt major players across the drug supply chain nationwide prompted a sell-off in shares of possible rivals, while sending Amazon shares up 2.5 percent.

"This is the beginning of the pharmacy industry shakeout". The companies expect it to finalize the transaction in the second half of 2018. Ann Hynes, an analyst with Mizuho Securities USA, wrote in a research note that "the bark is likely worse than its bite, at least initially", and noted that PillPack is not a very innovative offering and only has 40,000 customers.

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