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Amazon Acquires Online Pharmacy PillPack, Sending Shock Waves Through The Industry

Amazon may finally be ready to disrupt the consumer pharmaceutical industry with its acquisition of online pharmacy PillPack.

The e-commerce titan announced on Wednesday that it has agreed to acquire PillPack in a press release. The transaction could reduce consumers' dependence on brick-and-mortar pharmacies to get their prescription drugs. This industry has been among the few remaining sectors in retail not drastically affected by the online retail revolution.

A CVS HealthHUB in Houston. The company is planning to expand the concept.

Based in Manchester, New Hampshire, PillPack delivers prescriptions to customers' doors and manages refills automatically. The company packages pills based on the day they are supposed to be taken, rather than the specific medication. A customer who has multiple prescriptions can open up one package with every pill they are supposed to take at one time, eliminating the need to remember which pills need to be taken when.

PillPack operates in 49 states and may provide a way to navigate the complex healthcare and insurance environment that has previously stymied Amazon's attempts to enter the market.

The pharmacy and healthcare industries are experiencing challenges in the evolving marketplace that have led to major consolidations and mergers — such as the pending CVS-Aetna merger, Walmart's bid to buy Humana and Walgreen's move to buy AmerisourceBergen. Between CVS and Walgreens alone, the retailers operate just under 18,000 locations worldwide.

Upon the announcement of Amazon's purchase of PackPill, CVS shares dropped 9% in early trading on Wednesday and Walgreens Boots Alliance shares dropped 10.5%.

The acquisition, which Amazon expects to close in the second half of this year, is the second significant move it has made in the healthcare space recently. On June 20, it picked a CEO and a Boston headquarters for its partnership with Berkshire Hathaway and JPMorgan Chase to create a health insurance product for all three companies' employees.