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Amazon takes on pharmacy sector with PillPack acquisition

Amazon has entered into an agreement to buy US online pharmacy PillPack, which is licensed to deliver medication to customers in 49 states.

Shares of pharmaceutical retailers including Walgreens Boots Alliance and CVS Health plunged following the announcement on June 28. The deal is subject to regulatory approvals, but is expected to close during the second half of the year.

The acquisition highlights the eCommerce giant’s ambitions to digitise yet another consumer-facing industry, although it is unclear whether Amazon may look to expand its health services outside the US, considering the amount of red tape associated with health care in different countries.

“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” said Jeff Wilke, Amazon CEO Worldwide Consumer.

“PillPack is meaningfully improving its customers’ lives, and we want to help them continue making it easy for people to save time, simplify their lives, and feel healthier. We’re excited to see what we can do together on behalf of customers over time.”

Neil Saunders, MD of GlobalData Retail, said he thinks this will be the first play in an “increasingly aggressive” strategy by Amazon into the pharmacy market.

“This is incredibly bad news for traditional players, like Walgreens and CVS, who stand to lose the most from Amazon's determination to grow its share,” said Saunders, who pointed out that traditional pharmacy retailers are relying on loyalty from an older customer base which will naturally reduce over the next ten years, while younger shoppers are be more likely to use Amazon for their pharmacy needs in the future.  

Saunders said pharmacies need to think their futures, considering adding more services to their repertoire:

“It goes without saying that despite Amazon's determination, the pharmacy market is not as simple as other categories it has entered. Products and services are more complex and there are more regulations and procedures that need to be followed. It is also the case that some consumers may be reluctant to use Amazon for their health needs. Even so, we believe the market is ripe for disruption and, as it has demonstrated time and again, Amazon is just the player to pull that off.”