PillPack also was a concern because it had the potential to take substantial market share from the incumbents. Those businesses were worried about Amazon even before it acquired PillPack, because it's really the only company that could conceivably break up their control if it were to jump into the distribution market and pressure drug manufacturers to lower prices. PillPack needs relationships with PBMs like Express Scripts and Caremark, which is owned by CVS, to reach the masses of consumers who get their medicines through insurers. It won't be an easy market for Amazon to win. (Walgreens acquired the online drugstore in 2011 for $429 million and shut it down five years later.) Bezos also knows something about the industry, having taken a board seat at in the 1990s after Amazon invested in the company. It sorts pills and provides dispensers to make everything as easy as possible for users.įred Destin, an early PillPack investor, describes it as a "complicated and expensive" space with a potentially "big prize." In other words, it's the type of business that Amazon CEO Jeff Bezos loves - huge dollars, antiquated technology and so many regulatory barriers that the "smart money" is staying far away. PillPack has spent years going through the hard work of getting licenses to ship to every state except Hawaii, and built a system that automatically manages refills and works with insurers on behalf of customers. As delivery times come down to one day for Prime members, what's the point of ever driving to your neighborhood pharmacy? We also know that Amazon has not only been continuously adding household products to its marketplace, but has also been establishing its own brands for things like batteries, toilet paper, light bulbs and towels. What we know is that Amazon acquired an 800-plus person workforce and a high-growth, very low-margin business that, like a traditional retailer, uses the majority of its revenue to pay for inventory.
Other than Wilke's statement on the day of the deal, Amazon hasn't uttered a peep about what it plans to do with PillPack. The retail drug market for prescriptions has been dominated by large pharmacy chains, including CVS and Walgreens, and independent pharmacies, which all count on a few middlemen known as pharmacy benefit managers (PBMs) to negotiate prices, as well as a handful of large drug distributors.
Roughly 60% of American adults have at least one chronic illness, such as heart disease, cancer or diabetes, and 40% have two or more, according to the Centers for Disease Control and Prevention. prescription medications is approaching $500 billion a year and growing up to 7% annually, according to IQVIA, a provider of health data.
Here's a glimpse of what Amazon is now attacking: What Wilke didn't say was that Parker, the son of a New Hampshire pharmacist, had plans to surpass $1 billion in revenue by 2020, or that PillPack would soon be negotiating with large insurers to get its service into the hands of many more people while aggressively building out its technology to serve them. In the press release, Jeff Wilke, the head of Amazon's worldwide consumer business, said the companies would work together to help consumers "save time, simplify their lives and feel healthier." Shares of CVS, Walgreens and Rite Aid tumbled on concern that Amazon was further encroaching on their territory after already taking a huge chunk of the market for toiletries and household goods. On June 28, Amazon announced that it was buying PillPack for an undisclosed sum ( later revealed as $753 million), snapping up a company that delivers most of the medications consumers can get from their local drugstore packaged in convenient white packets so people will remember to take them, along with automatic refills and 24/7 customer support. And from there it didn't take long for Parker to decide that the bidding had ended. A 14-year company veteran and guest concert pianist with the Seattle Symphony who'd recently been named Amazon's vice president of consumables, Kabbani shared Parker's concern about the pharmacy industry and the dominant players' inability or unwillingness to put the consumer first.Įventually, Parker and Kabbani were the only ones doing the talking, as all the other participants faded into the background. But bankers from Frank Quattrone's Qatalyst Partners suggested that Parker and co-founder and product chief Elliot Cohen fly across country for a meeting with one particular Amazon executive: Nader Kabbani.
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