Amazon’s 2018, $700 million acquisition of PillPack, an online pharmacy based in New Hampshire, is proof that Amazon intends to enter the prescription drug market, but speculation around its business strategies remain widespread.
Details about Amazon’s pursuit of direct contracts with health plans and employers were revealed in April court filings by CVS, a lawsuit brought to thwart one of its executives, John Lavin, from assuming a position with PillPack, claiming the online pharmacy has “already begun aggressively approaching CVS Caremark’s clients,” including Blue Cross Blue Shield, “to provide its members with prescription home delivery.”
Although a federal judge recently ruled in favor of CVS, deciding that Mr. Lavin must delay joining PillPack for 18 months to honor a non-compete agreement, larger questions loom as to whether Amazon-PillPack ultimately will negotiate directly to distribute medicines. Since pharmacies with mail delivery must contract with pharmacy benefit managers (PBMs) to dispense medications, by contracting directly with health plans and employers, Amazon would become its own PBM, which, when coupled with its distribution capabilities, would alter the drug market rapidly.
PillPack’s CEO, TJ Parker, said the company had no immediate plans to become its own PBM but it had “explored a number of different things.” Three pharmacy giants including CVS now control 80% of the PBM market, which some say leads to the high cost of drugs in the U.S.