Rite Aid stock falls nearly 11 percent on news of Amazon purchase

PillPack prepackages and mails consumers pills.									Pat Greenhouse  The Boston Globe

PillPack prepackages and mails consumers pills. Pat Greenhouse The Boston Globe

Inc. said on Thursday that it would buy online pharmacy PillPack for an undisclosed amount, sending shares of drug distributors and retailers tumbling as the e-commerce giant moves deeper into healthcare sector. PillPack, meanwhile, is already licensed to deliver medications to all 50 USA states, helping Amazon clear the regulatory hurdles that might have complicated its foray into the prescription drug industry. Instead of packaging user medications by the prescription (with a month's worth of one drug in one bottle and another drug in another bottle, for example), PillPack packages medications by the dose.

But today's deal comes with few details and no promise that Amazon will be able to scale up PillPack's business, which earned about $100 million in 2017.

CVS fell 8% in early trading.

News of the acquisition sent pharmacy stocks tumbling yesterday, with Walgreens falling almost 10 percent and CVS sliding more than 6 percent. Walgreens was already trading lower after reporting lower same-store sales at its United States pharmacies.

The PillPack deal is expected to close later this year.

Bezos already has signaled his frustration with a health-care system characterized by rising costs for consumers and companies, sometimes-poor outcomes, and unnecessary complexity. Community pharmacy has so many strengths to build on, and they have to - if they just sit by and watch, you run the risk of losing to other players, not necessarily Amazon, but any of the other chains offering a better service to consumers. They're saying they want to get mail order back up to 20% of the USA pharmacy market; and that's probably the threshold they look at in other markets.

The company's interest in drugs has been considered a factor in a wave of recently proposed mergers, including CVS' acquisition of Aetna and a union between the health insurer Cigna and Express Scripts, the pharmacy benefit manager.

Amazon.com had made a major step in its bid to revolutionise the healthcare indutsy by buying an online pharmacy. Kroger Co., the biggest US supermarket chain, saw $2 billion in market value wiped out in one day.

Some analysts played down the immediate threat Amazon poses.

"I think this move jump-starts efforts and clears some hurdles [for Amazon], and what it's really going to do is fast-track any moves they want to make to get licensed", Rea said.

Prescription drugs sales are largely intertwined with groceries and personal items like makeup and shampoo and Amazon already sells bulk packs of latex gloves, bed pads and syringes.

It has raised $118 million in funding, with investors including Accel Partners, Atlas Venture, CRV, Founder Collective, Menlo Ventures, Sherpa Ventures and Techstars.

For now, Walgreens indicated that it was in no hurry to find a deal to respond to Amazon, despite the damage to its stock.

"The role of the physical pharmacies will continue to be very, very important in future".

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