Why Did Amazon Really Acquire PillPack?

It’s easy to get lost in the high-finance numbers when examining Amazon’s massive push into health care. But to understand what’s really driving its moves in pharmacy, it’s important to know the back story of Amazon’s $750 million-plus acquisition of PillPack, an online pharmacy for most medications that consumers can get from their local drugstores. PillPack sorts all of a customer’s medications by dose and delivers them right to their front door. Printed on the outside of each packet is the list of medications to take at the recommended time of day. Not only that, patients receive automatic prescription refills and customer support 24/7.

A recent CNBC report pieces together the origins of the deal and what led Amazon to PillPack even as many other suitors were pursuing the company. Turns out, PillPack’s CEO TJ Parker and Amazon’s Nader Kabbani, vice president of consumables, had a meeting of the minds in May 2018. They shared one common concern: Neither the pharmacy industry as a whole nor its most dominant players were willing or able to put the customer first.

And when the Amazon-PillPack deal was announced on June 28, 2018, Amazon made no mention of its plans to surpass $1 billion in pharma revenues by 2020 or that PillPack soon would be negotiating with large insurers to get its service to more people while aggressively building the technology to serve them.

Now Amazon and PillPack are seen as a threat to pharmacy benefits managers in the nearly $500 billion U.S. prescription and medication business. Other takeaways from the report:

• The average PillPack user in 2018 generates $5,000 in revenue, which is far more than the average Amazon Prime member, who spends about $1,300 a year.
• Amazon is now heavily promoting PillPack to its Prime subscribers.
• CNBC also obtained a confidential document showing that Blue Cross Blue Shield, which covers more than 100 million Americans, has reached out to PillPack about providing service to its members.

Elliott Cohen, PillPack’s co-founder and chief product officer, will address consumer-driven innovation and health care in his talk called “Addressing Disruption Through Innovation and Value” at the AHA Executive Forum July 11 in Boston.