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Amazon's Pharmacy Deal Threatens Retail Drugstores

30 June 2018

Mr Read's comments followed Amazon's announcement that it had acquired PillPack, an American company which offers pre-sorted dose packaging, home delivery and a customer service commitment for people who take multiple daily prescriptions.

The company, which has its primary pharmacy in Manchester, New Hampshire, ships to all states except Hawaii.

The firm says it is 'designed to provide the best possible customer experience in the USA for people who take multiple daily prescriptions'.

Walgreens" chief executive, Stefano Pessina, said he was "not particularly worried" about the PillPack deal in an earnings conference call with analysts on Thursday, describing it only as a "declaration of intent' by Amazon.

Walgreens Boots Alliance raised the lower end of its guidance for fiscal year 2018 by 5 cents per share and now expects adjusted EPS of $5.90-$6.05. Amazon will retain the Manchester location, according to PillPack.

The PillPack deal is already scaring investors in the top two drug store chains.

Amazon was widely expected to move into the pharmacy business.

The news comes just a week after a joint venture of Amazon, Berkshire Hathaway Inc and JPMorgan Chase & Co named a CEO who will be tasked with significantly cutting healthcare costs for its estimated one million employees and dependents.

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"This provides an avenue for Amazon to disrupt major pharmacy chains the way that they've disrupted booksellers, pet supplies, clothing and other big-box retailers", said Lisa Bielamowicz, president of consultancy Gist Healthcare.

Amazon's entrance into the healthcare industry has caused the market value of drugstores to drop more than $14 billion a single day. Kroger Co. (KR.N), the biggest USA supermarket chain, saw US$2 billion in market value wiped out in one day.

Three of the largest players, including the CVS and Walgreens, the #1 and #2 market leaders respectively, all took hits today.

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These and other health care stocks rose a few months ago after reports that Amazon may not have been interested in selling prescription drugs. That effort ultimately failed and Walgreens purchased the money-losing startup in 2011. The company raised more than $118 million from brand-name investors including Accel, Sherpa Capital and NY rapper Nas's Queensbridge Venture Partners.

A September 2016 funding round valued the Boston-based startup at around $360 million, according to venture capital data base PitchBook. The companies said the deal would have to clear regulatory hurdles before it is complete.

PillPack said it has tens of thousands of customers across the country.

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

Amazon's Pharmacy Deal Threatens Retail Drugstores