A startup that grew out of its founder’s experiences working at his father’s pharmacy business in Concord has been bought by online retail giant Amazon in a move that is shaking up the prescription drugs industry.
Amazon announced Thursday that it would acquire Manchester-based PillPack, an online pharmacy that seeks to simplify medication for people who take multiple drugs by delivering packets with presorted doses. Terms of the deal were not disclosed, but several news outlets said sources close to the deal indicate it was for just under $1 billion.
PillPack was founded by T. J. Parker, 31, who grew up working at Northeast Pharmacy Services in downtown Concord, where his father was a partner. He has said in many interviews, delivering prescriptions from the pharmacy counter made him think there was a better way for patients to keep track of their medicines.
Parker holds a Doctor of Pharmacy degree from Massachusetts College of Pharmacy and Health Sciences. While there, he met the company’s eventual co-founder, Elliot Cohen, through MIT’s Hacking Medicine program, which seeks to help entrepreneurs in the medical services field. They founded PillPack in 2013 in Manchester.
With PillPack, a person who takes several different medications each day can receive a packet with all the pills in a single pouch, instead of having to manually sort the doses into pillboxes for each day.
Amazon’s purchase of PillPack sent ripples throughout the industry. Stock prices for major pharmacies and other companies that help deliver drugs to consumers tumbled. CVS Health, Walgreens and Express Scripts Holding opened down on the news.
“While Amazon’s focus and interest in pharmacy to date has been somewhat cloudy, (Wall) Street will see this as a full-frontal attack,” Eric Coldwell, an analyst at Baird Equity Research, wrote in a note to investors, adding that companies in the prescription drug supply chain were being “crushed.”
The PillPack acquisition gives Amazon a foothold in the regulated pharmacy business. PillPack has pharmacy licenses in all 50 states and brings in-house expertise that could help Amazon move more quickly into a space filled with regulatory obstacles, said Michael Rea, chief executive of Rx Savings Solutions, a company that develops software to help consumers lower the cost of prescription drugs.
“I think this move jump-starts efforts and clears some hurdles (for Amazon), and what it’s really going to do is fast-track any moves they want to make to get licensed,” Rea said. “PillPack has got a good, fast-growing business, they’ve got infrastructure in place, and they’ve got the regulatory compliance piece in place. ... It brings speed.”
Other companies have already been preparing for the competition. CVS Health, for example, has launched next-day prescription delivery services nationwide and same-day delivery in select cities, including New York, Boston, Miami, Philadelphia, San Francisco and Washington.
Experts said buying the company outright will allow Amazon to develop and scale a mail-order pharmacy business more quickly than if it had to develop the expertise from scratch. PillPack has also developed expertise in battling with payers and pharmacy benefit managers to have its services covered, and Amazon will bring new clout to those negotiations.
PillPack also declined to comment but disclosed that it has tens of thousands of customers and brought in more than $100 million in revenue last year.
“Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the U.S. who can benefit from a better pharmacy experience,” Parker said in a news release.
Parker has another Concord-related business accomplishment in his resume: As a boy, he delivered the Concord Monitor.
(Material from the Washington Post was used in this report.)