Amazon buys online pharmacy PillPack

I predicted this several months ago.  When Amazon bought Whole Foods it seemed to me that the best part of that deal was real estate.   Having parking and a presence in better-off neighborhoods was perfect. The rest of the puzzle was  the absolute mess of drug sales, an overpriced, high margins industry with a huge potential for data-driven sales.  Buying drugs online made great sense except that someplace in the system a patient needs to  see a pharmacist or even nurse for help with their prescription.

Walgreens, CVS, Rite-Aid, the drug stores in supermarkets, (Walmart) and the local chains (Bartells) are in  deep trouble.  Amazon has the software to make drug sales efficient.  To make this happen,  Amazon needed licenses that are different in each state.  So,  Amazon has been getting pharmacy licenses across the US. Now they have the licenses, they have local stores and they own PillPack.

The rest?  Well, drugs maybe the key to unlocking America’s healthcare mess.  In January Bezos tied up with Warren Buffett to create a new “non-profit” entity,  “free from profit-making incentives” to focus on employer-based health benefits.  The very profit-driven Amazon Delivers Drugs (ADD), backed up by the financial resources of  Berkshire Hathaway and JPMorgan, will be a  primary beneficiary of the new “non-profit.”

Next step?  I  predicted that HQ2 will be headed to Philadelphia.  Suburban Philly is in the midst of a huge part of the big pharmaceutical industry.   The University of Pennsylvania, with its medical school, and business school, would  be a great source of expertise for ADD Amazon Delivers Drugs!

But wait, there’s more.  The announcement by Bezos and Buffett in January says that the new entity is not just a drug store.  Combining the availability of a doctor or physician’s assistant with drug sales retail puts Bezos in a unique position to revolutionize not just the retail drug business but healthcare itself.  The model is already there in the merger of Aetna with CVS … that combine creates a behemoth for the Doc in the Box industry.  Put Docs in the Whole Food Healthy Food stores, add software to watch a patient’s drug needs, Amazon’s support using existing systems at PilPak via the internet,  and Amazon delivery?

As for HQ2, I may hedge the bet on Philly.  PillPak was founded at MIT and its headquarters are now in Boston’s suburb Somerville.  The company has offices in Austin, Manchester (near Boston), Miami, Salt Lake City, Phoenix, and Brooklyn NY.  So Boston is a real player.