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Amazon to buy online pharmacy PillPack, jumping into the drug business

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Amazon announced today that it is buying online pharmacy PillPack, the deal immediately shook the industry.

In the world of health care, PillPack, an online pharmacy, is a pretty small player. Its workforce of 1,000 or so people pales in comparison with the 235,000 who work for Walgreens.

But when Amazon announced today that it was buying PillPack, the deal immediately shook the industry. Shares of Walgreens and Rite Aid tumbled more than 9 percent, while CVS Health dropped 6.6 percent.

That is because with one move, Amazon answered the question about when — and how — it would grab a piece of the $560 billion prescription drug industry.

It was precisely the sort of deal that the health care industry had feared.

The company’s interest in drugs has been considered a factor in a wave of recently proposed mergers, including CVS’ acquisition of Aetna and a union between the health insurer Cigna and Express Scripts, the pharmacy benefit manager.

PillPack, which started in 2013, distributes pills in easy-to-use packages designed for consumers with chronic conditions and multiple prescriptions.

It has raised $118 million in funding, with investors including Accel Partners, Atlas Venture, CRV, Founder Collective, Menlo Ventures, Sherpa Ventures and Techstars.

It is not necessarily a major player in the pharmacy world, bringing in about $100 million in revenue in 2017, according to the company. But PillPack has long been seen as a potential target for larger businesses looking at online drug sales.

Its national reach made it an attractive prospect for Amazon, said Adam J. Fein, chief executive of the Drug Channels Institute, who studies the industry.

Even as Americans have shifted their buying habits online, prescription drugs have remained a stubbornly brick-and-mortar purchase. About 90 percent of all prescriptions are filled at a pharmacy counter, according to Iqvia, a research firm.

If Amazon can break that habit, it could upend the industry. “It helps people to eliminate that trip and buy everything they need from Amazon,” said Stephen Buck, a pharmaceutical supply-chain expert.

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