Amazon has accelerated its entry into the pharmacy business with the rollout of Amazon Pharmacy, an online service that will go head-to-head delivering medicine against major physical retail chains such as Walgreens and CVS.
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The retail giant is promising two-day delivery with no extra charge for Amazon Prime members, along with a help line staffed by pharmacists. It accepts most insurance plans, and will also offer a discount card for uninsured customers that provides an 80% discount on generic meds and 40% off brand names.
The move didn't come without warning, since Amazon was already been in the business of delivering medicines, especially since it acquired online pharmacy PillPack for more than $700M in 2018. Amazon Pharmacy is partly built on the infrastructure Amazon got with PillPack, including fulfillment centers and software, CNBC reports.
"PillPack has provided exceptional pharmacy service for individuals with chronic health conditions for over six years," Senior Vice President of North American Consumer Doug Herrington said in a statement. "Now, we’re expanding our pharmacy offering to Amazon.com."
Investors reacted to the news of Amazon's foray into pharmacy by selling shares of Walgreens Boots Alliance (down 9.63% on Tuesday) and CVS Health (down 8.59% on Tuesday). GoodRx Holdings, which offers a pharmacy discount card, also saw its shares drop on Tuesday by 22.5%.
In recent years, physical drugstore chains have been consolidating, with CVS emerging as the largest, with over 9,900 U.S. stores, and Walgreens as a close second, with over 9,000 stores.
The major physical pharmacy chains have their own online ordering and delivery services that offer much of what Amazon is going to offer, so it isn't clear how much of a dent Amazon will put into their business, investor reactions notwithstanding.
"We have made considerable enhancements to our fulfillment abilities," co-Chief Operating Officer Alex Gourlay said during Walgreen's most recent earnings call in October. "As you have heard, we have significantly increased our online capacity in response to the heightened demand in recent months.
"Starting this Friday, we will be rolling out a significantly improved convenience customer offering," Gourlay said. "This will allow online or app orders to be ready for collection in as little as 30 minutes in-store or drive-thru windows or curbside, all available nationwide.
UBS analyst Eric Sheridan told Barron's that Amazon's move was mainly to add value to its Prime membership program. The strongest impact of an online Amazon drugstore may be on GoodRx, he said.
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