Amazon’s announced foray into the pharmacy business sent Walgreens’ shares plummeting by $6 billion Thursday and made smaller dents in Rite Aid and CVS’ stock values. Analysts attributed all three established chains’ stock losses to Amazon’s recent $1 billion purchase of PillPack, an online pharmacy that delivers medications in already-sorted doses.
Walgreen’s shares tumbled 9.9% by the end of Thursday, adding up to more than $6 billion in lost value. Pharmacy shareholders fear that Amazon will use PillPack to outsell and undercut the established pharmacies, who won’t be able to compete with its signature business model, said Lisa Bielmowicz, president of consulting firm Gist Healthcare.
“This provides an avenue for Amazon to disrupt major pharmacy chains the way that they’ve disrupted booksellers, pet supplies, clothing and other big-box retailers,” said Lisa Bielamowicz, president of consultancy Gist Healthcare.
Not all analysts see any immediate threat to traditional pharmacies, however. Vishnu Lekraj, a Morningstar senior analyst, called the Thursday plummet in Walgreens stock a “huge overreaction” and said that investors and reporters are hyping Amazon’s PillPack purchase into “a bigger deal than what it actually is.”
Lekraj said that mail-order pharmacy sales in general have been fairly flat over the last several years. Also, PillPack itself is a small company that may not be able to offer pharmacy benefit managers or insurers the kinds of medication discounts they would like, he said. He concluded that PillPack will have to overcome many current obstacles before it can take on the likes of Walgreens and other major industry players.
Walgreens executives told reporters that they are working hard to “change the level of our services to the customers” but that they are confident that brick-and-mortar pharmacies will continue to thrive.