Amazon acquires PillPack- Begins HealthCare Disruption

Amazon acquires PillPack and starts the healthcare disruption. Amazon has been considering entering the healthcare sector for quite some time particularly around employee health benefits. They made news over the past year when it was announced they were looking to enter the space via employee health benefits through a joint venture with Warren Buffet-CEO (Berkshire) and Jamie Diamond-CEO (JP Morgan). As you know, health benefits are typically provided through employers.

Additionally, Amazon was in the process of securing online pharmacy licences in 8 states to develop an online business. Through this acquisition of PillPack for 1 billion, they are now licensed in 50 states.

Many Americans over 50 years of age have at least 5 current prescriptions at any given time. Many of them are on mail order prescription programs because it's more convenient than driving to a pharmacy, waiting in line and its cheaper. As our aging population continues to grow and we live longer, this business and its need in the marketplace is only expected to grow.

PillPack creates packets of pills for consumers to take on a daily basis in pre-made doses. It separates them into a sealed "pillpack" similar to what you would do manually via a pillbox that is labeled Monday thru Sunday. These packages come labeled with days and hours they need to be taken. Pillpack makes sure medications will not conflict with other medications a consumer may be taking. It also coordinates refills and renewals.

They operate just like a traditional pharmacy. They bill your insurance, you pay your co-pay, but they deliver it for free to you door.

At this point, this acquisition by Amazon is not a major threat to CVS or Walgreen as the market for PillPack services is generally for consumers with multiple prescription. So a smaller market.  But in the long-term this acquisition, coupled with a employee health benefits business being built and possibly the acquisition of a pharmacy benefits manager that has direct relationships with employers, you may see a fundamental shift in how Amazon integrates itself into the healthcare system. Overall spending in the healthcare prescription business is 10% of all healthcare spending. It also represents 1.5-2% of overall U.S GDP through retail drug sales. There is opportunity here for Amazon to disrupt this vertical.

Additional info here:

Amazon buys PillPack-TechCrunch

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