— This is the script of CNBC's news report for China's CCTV on June 29, 2018, Friday.
The information that Amazon acquires online pharmacy Pill Pack verifies the market’s guess that Amazon indeed want to scale up its business in medical industry. Let’s have a look over why Amazon acquires Pillpack.
Pill pack is an online pharmacy, as well as a star up business. The system will automatically obtain the user's prescription information, and then according to the time and medication of the user's needs, Pill pack will package and send pills to the user, eliminating the trouble of going to pharmacy frequently, at the same time, Pill pack has another humanized approach, which is printing the dosage, name and time on the package to remind the user to take medicine on time.
Currently, Pill Pack has received drug delivery licenses in 49 states across the United States, and this kind of business model also draws attention from retail giants. For example, according to the internal information from CNBC, in April this year, WALMART wanted to acquire Pill pack by no more than $1 billion. However, Amazon wins this acquisition. Pill pack’s founder also believes that Amazon has a great attraction to Pill pack’s long-term business propaganda. And the signal that the information sends to the market is that Amazon entered medical supply chain area. Following this development, we will see more actions from Amazon. While this signal is a danger signal to other medical retailers in the market, triggering market turbulence overnight.
Let’s take a look on other medical retail companies while Amazon jumped 2.47%.
Stocks plunged across the board. CVS, the biggest drugstore in US, once declined 10%, closing down 6.1%; drugstore chains Rite Aid was off 17% at the beginning, with an 11.11% decrease at the close and Walgreens Boots Alliance, the leading pharmacy chains in US, shed 9.9%.
The market value of those 3 traditional drugstores went down 13 billion within 1 hour at the beginning and that was off $11 billion at the close. People are not surprised about the news that Amazon will enter medical market though; the plunge in stock price indicating that traditional pharmaceutical retail industry worries about the influence that Amazon will bring. So how will Amazon change the medical market? There were 2 guess in the market, first, disturbing medical price. Second, scale its business in pharmaceutical distribution.
Morgan Stanley believes that the possibility of the latter is relatively large, two reasons for that: first, medical supply chain is a natural extension of Amazon's existing logistics system. Second, medical subscription can attract the user above 55 to be Amazon’s paid subscriber and improve acceptance and use of Amazon Prime services.
For the US pharmaceutical retail industry, this is a market with sales of up to $300 billion a year, with over 4 billion regular prescriptions per year. Therefore, for Amazon, this is indeed a very attractive market, and for the market, competition will become more intense.