UPDATE 3-Amazon to buy PillPack in drug retailing push

(Adds detail, updates shares)

June 28 (Reuters) - Amazon.com Inc said on Thursday it would buy online pharmacy PillPack, a small but significant step into the U.S. healthcare sector, sending shares of drug distributors and retailers lower.

Such a move had long been expected by investors in established healthcare companies, who have long feared the world's biggest online retailer's potential to disrupt the complex and opaque U.S. drugs business.

The deal for PillPack, which organizes and delivers prescription medications, will put it in head-to-head competition against existing drug retailers and distributors such as CVS Health and Walgreens Boots Alliance. Shares of both fell more than 9 percent in early trading.

Shares of drug wholesalers McKesson Corp, Cardinal Health and AmerisourceBergen also fell sharply. Pharmacy benefit manager Express Scripts was also lower.

"Amazon's acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space," said Neil Saunders, managing director of GlobalData Retail.

Walgreens' chief executive, Stefano Pessina, said he was "not particularly worried" about the PillPack deal in an earnings conference call with analysts on Thursday, describing it only as a "declaration of intent" by Amazon.

Some analysts played down the immediate threat Amazon poses.

"At this juncture we are not worried about Amazon's entrance into the prescription market," Cantor Fitzgerald analyst Steven Halper said in a note. "Pharmacy networks are controlled by managed care companies and pharmacy benefit managers with captive mail order capabilities... Even if PillPack is a network provider today, it does not mean it will be a network provider in the future, especially if Amazon has designs of significantly ramping its prescription volume."

The purchase follows the announcement in January that Amazon, Berkshire Hathaway Inc and JPMorgan Chase & Co were forming a joint venture to tackle rising U.S. healthcare costs. The three companies said they would use big-data analysis and other high-tech tools to improve care and cut waste.

PillPack, which also serves patients with multiple chronic conditions, is authorized to deliver in 49 states.

The company had attracted interest from Walmart Inc, which was looking to buy it for under $1 billion, CNBC https://www.cnbc.com/2018/04/02/walmart-buying-pillpack-online-pharmacy-sources. h t m l had reported in April. The PillPack deal is expected to close during the second half of 2018. (Reporting by Sonam Rai and Ankur Banerjee in Bengaluru; additional reporting by Ben Hirschler in London, Editing by Anil D'Silva and Bill Rigby)