NEW YORK • Amazon announced on Thursday that it would acquire PillPack, an online pharmacy with a nationwide reach, in a deal that could quickly make the online giant a major player in the drug business.
One barrier to entry for Amazon to the US$560 billion (S$764 billion) prescription drug business had been the bureaucratic hassle of securing pharmacy licences in each state. But in acquiring PillPack, it essentially leapt over that hurdle because the company is licensed to ship prescriptions in 50 states.
"PillPack's visionary team has a combination of deep pharmacy experience and a focus on technology," Mr Jeff Wilke, Amazon's chief executive of its consumer business, said in a statement. "We're excited to see what we can do together on behalf of customers over time."
Financial terms of the deal were not announced. It is expected to close in the second half of this year.
Anxiety over what Amazon might do in healthcare has unsettled the industry and has been seen as one factor in a wave of recently proposed mergers, including CVS Health's acquisition of Aetna and a union between health insurer Cigna and pharmacy benefit manager Express Scripts.
PillPack, which started in 2013, is an online pharmacy that distributes its pills in easy-to-use packages designed for consumers with chronic conditions and multiple prescriptions.
The company sorts prescriptions by the dose and includes a label with a picture of each pill and notes on how it should be taken. It has long been seen as a target for larger businesses looking to expand their reach in online drug sales, like Amazon and Walmart.
While innovative, it is not necessarily a major player in the pharmacy world, bringing in about US$100 million in revenue last year.
But its offer of a unique service - the easy-to-use packages - with a national reach made it an attractive prospect for Amazon, said industry analyst Adam Fein, chief executive of the Drug Channels Institute.
Even as Americans have shifted their buying habits online, about 90 per cent of all prescriptions are filled at a pharmacy counter, according to research firm Iqvia.
If Amazon can break that habit, it could significantly upend the industry, said Mr Stephen Buck, a pharmaceutical supply-chain expert who co-founded drug-price website GoodRx. "It helps people to eliminate that trip and buy everything they need from Amazon," he added.
In January, Amazon, Berkshire Hathaway and JPMorgan Chase announced plans to form an independent healthcare company for their employees in the US, in what could become an incubator for new ideas.