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Amazon’s seemingly boundless appetite for acquisitions and new market territory has recently gobbled up PillPack, a mail-order prescription services that bundles medication into individual dosing packs.

With a valuation that was driven higher by a bidding war between two Goliaths, Amazon and Walmart, it shows the value that both players see in the prescription space.  As Amazon continues to move into more traditional retail with acquisitions like Whole Foods, Walmart is working the reverse angle by bolstering its retail dominance with a more powerful online presence; the acquisition being supporting evidence of that goal.

It feels not unlike the battle for eyeballs between Netflix and HBO.  A few years ago it was clear that Netflix had mastered distribution and HBO had mastered content creation.  Both scrambled to improve in the area of their competitors core competency.  As Netflix founder Reed Hastings put it, “The goal is to become HBO faster than HBO can become us.”  For now, at least, it seems they’ve both done an admirable job of solving their deficiencies to become wholly-formed content creation and media distribution companies and the market appears to have room for both of them.

But digital media and prescription medication fulfillment are not analogous in at least one critical area.  While media creation is an art form and involves taste and choice and preference by the viewer, getting a prescription filled is largely just a commodity.  The drug is the same regardless of where it comes from.

The more commoditized service means it’s easier to envision a truly dominant player that owns most of the market.  It doesn’t seem unreasonable to think that Amazon could end up owning the space by building on some of the things it already does so well – online shopping experience, ease of purchase, recurring subscription-based ordering, and fast fulfillment and shipping.  PillPack aligns nicely with these areas of proficiency and its value for Amazon is twofold.

One, it gives them an established entry point into a market where they had essentially zero presence.  Arguably the biggest gap in the Whole Foods acquisition was the lack of pharmacy services in any of their stores.  PillPack provides established licensing and immediate ability to fulfill prescriptions either through the mail or, perhaps, through Whole Foods locations.

Second, Amazon gets the benefit of an innovative method of packaging pills that may improve medication adherence as well as prevent medication misuse, particularly in the swelling older adult population. 

Walmart only stood to realize the latter of these two benefits.  Perhaps this is why they lost out on the acquisition – the value was simply greater for Amazon.

Mail order prescription benefits are nothing new and have been offered by PBMs (Pharmacy Benefit Managers) like ExpressScripts and OptumRx for many years.  But the individual packaging of different medications together and even vitamins and supplements to make daily or multiple-times-per-day medication dosages easy to track and take is true innovation in the space.  And it’s a service we fully recommend checking out.  Get started with PillPack