Amazon is buying the online pharmacy PillPack, the e-commerce giant announced on Thursday, representing Amazon’s latest push into the U.S. healthcare market.
The deal, reportedly worth around $1 billion in cash, is a major blow to retail rivals like Walmart, which was also vying for Somerville, Massachusetts-based PillPack. Traditional drugstore operators like CVS, Rite Aid and Walgreens Boots Alliance, all saw their stock prices drop on news of Amazon’s PillPack acquisition.
On the other side of the deal is PillPack CEO TJ Parker, 32, who co-founded the company in 2013 along with Chief Product Officer Elliot Cohen, 35. Parker and Cohen, who met while Parker was studying to become a pharmacist and Cohen was getting his MBA at MIT, started PillPack in the hopes of making it easier for people to buy prescription and non-prescription drugs online.
“PillPack makes it simple for any customer to take the right medication at the right time, and feel healthier,” Parker said in a statement on Thursday.
The company, which was valued at roughly $360 million in 2016 according to PitchBook, bills itself as a full-service pharmacy that fills prescriptions and ships drugs packaged in pre-sorted doses. The aim is to make it easier for customers to manage multiple medications. The startup is also notable for using robots to sort customers’ drugs in order to save on the costs of human workers.
Parker grew up working with his pharmacist father at what he describes as a “traditional mom-and-pop pharmacy,” in New Hampshire, Parker said in a 2016 interview with Founders Workbench.
“As a kid, I worked at the pharmacy and delivered medication to people in their homes,” Parker remembered. “I was very aware at an early age of how complicated it can be to manage prescriptions.”
Parker, who opted to follow in his father’s path by studying to become a pharmacist at the Massachusetts College of Pharmacy and Health Sciences in Boston, told Wired in 2017 that delivering prescriptions for his parents' shop taught him about the difficulty many customers have managing their medicines. One woman had trouble reading the labels on her various medicines, so Parker would write the first letter of each drug in Sharpie on top of the pill bottle.
While Parker was in college, his father even started a new pharmacy business that pre-sorted customers’ medications, offering inspiration for what PillPack would later bring to its online pharmacy.
Because Parker was drawn to the potential of online technology in the pharmacy world, he started participating in “Hacking Medicine" competitions at MIT, which revolved around start-up ideas in the healthcare space. That's where Parker met Cohen, who was organizing the competitions. Despite not being an MIT student, Parker teamed with Cohen in 2012 to pitch the initial idea behind PillPack — “a consumer-friendly online pharmaceutical experience,” he said in 2016. The duo's idea won.
A month later, Parker and Cohen applied to start-up accelerator Techstars Boston with the same idea and were accepted. They officially founded the company in February 2013, the same day they started the Techstars program, with the company tagline: “Pharmacy simplified.”
By July 2013, PillPack had already raised just over $4 million in funding, with a group of investors led by venture capital firms Atlas Ventures and Founder Collective. (Prior to the sale to Amazon, PillPack had raised a total of over $117 million in outside funding from backers ranging from Facebook-investors Accel Partners to rapper Nas’s QueensBridge Venture Partners.)
PillPack’s online pharmacy officially launched in February 2014. In the very early days, Parker and Cohen told Wired last year, PillPack had only 50 customers, so its nine employees would meet for pizza parties at Parker’s apartment, where they'd then e-mail friends and family trying to “sell them drugs” to increase the customer base.
But the product caught on fast and the company had already shipped more than 1 million drug packages by June 2015. Also in 2015, Parker was named to Forbes’ “30 Under 30” list of successful young entrepreneurs, while both Fortune and Wired magazines called PillPack “the pharmacy of the future,” in 2015 and 2017, respectively.
In April, it looked like PillPack was set to be sold to another retail giant when the startup was in acquisition talks with Walmart about a deal also reportedly worth close to $1 billion. The companies declined comment at the time, but CNBC also reported that the sources said Amazon had also been kicking the tires on a PillPack deal.
In the end, Amazon reportedly swooped in to outbid Walmart, on Thursday. On June 20, Amazon, J.P. Morgan and Berkshire Hathaway for the joint venture the three companies launched in January to shake up the healthcare industry. That partnership and the deal for PillPack are that Amazon is continuing to make a big push into America’s $3 trillion healthcare market.
Like this story? Subscribe to CNBC Make It on YouTube!