The long-rumored entry of Amazon into the drug world became reality when the online retail behemoth bought PillPack for about $1 billion in late June. While the size of the entity is comparatively small, it does immediately (well, when the deal closes toward the end of the year) put Amazon on the map with the ability to sell drugs in all 50 states.
Now, retail drug chains and Pharmacy Benefit Managers (PBMs) need not worry too much for quite some time, except perhaps for the hit taken on their stock prices with news of the acquisition. However, the purchase of PillPack by Amazon does threaten to upend how drug sales are done in America over time.
Amazon likely will need to either purchase or found a traditional PBM in the meantime. But if Amazon CEO Jeff Bezos has his way, the current opaque system of distributing and financing drugs in the nation may give way to transparent online and other purchasing. It, too, could usher in additional innovation and sweeping changes on the part of retail drugstores (CVS, Walgreens, Rite Aid, and more), PBMs (CVS, ESI, Optum Rx, and more), and other entities that lurk in the shadows of the system (wholesalers, rebate aggregators, other discounters, and more).
CVS is already buying Aetna, and Cigna is pursuing ESI. Plans want to gobble up PBMs. Vertical and horizontal integrations among plans, PBMs, providers and other provider entities should continue. And lest we forget, Amazon, Berkshire Hathaway, and JP Morgan’s foray into value-based insurance purchasing.
So, the world as we know it may give way to ... well, who knows what, even though my prognostications will continue here each week. What we do hope is that lower costs and reasonable insurance premiums for Americans emerge.