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As Amazon bolsters its PillPack business to take on the prescription drug market, industry stalwarts CVS and Walgreens are vigorously defending their turf, setting up a protracted battle between the old guard and the new.
Amazon bought internet pharmacy PillPack last year, a deal that sent shares of pharmacy companies tumbling. To get people onto its mail-delivery service, PillPack needs patients to switch from their existing pharmacy, which often means transferring prescriptions from CVS or Walgreens, the two largest chains in the U.S.
But PillPack has run into a significant roadblock in getting those transfers approved. CVS and Walgreens are rejecting an increasing number of their requests, claiming that PillPack isn't getting proper consent from patients. PillPack says it always gets patient approval before making transfer requests and blames the pharmacy giants for unfairly refusing to honor them, sometimes hanging up on PillPack's pharmacists or throwing the request forms in the trash.
"While incumbent pharmacies may be disappointed in the loss of business, it is unacceptable to make unsubstantiated allegations about PillPack's practices while simultaneously creating systemic barriers that make it harder for a customer to switch pharmacies," PillPack spokeswoman Jacquelyn Miller told CNBC.
The conflict has continued to escalate, with a source familiar with the matter telling CNBC that Amazon is documenting all cases of refused transfers. The incumbents are unwilling to roll over for Amazon in a market where a single customer, who often has chronic conditions and requires regular refills, can represent thousands of dollars of revenue a year through copayments and insurance coverage.
PillPack, a licensed pharmacy service in 49 of 50 states, launched in 2014 with a service that neatly packages, labels and delivers medications every month with free shipping. CVS has followed with its own multi-dose packaging option for patients who need help taking multiple medications. Walgreens also has a home delivery program.
The intensifying spat over transfers offers a window into the larger challenge Amazon faces as it tries to mimic its e-commerce playbook in the prescription medication world, where spending in the U.S. is approaching $500 billion a year. The company is already battling Surescripts, an e-prescribing network part-owned by CVS and Express Scripts, over a patient data dispute. Last month, Surescripts threatened to cut off a contract with a third party called ReMy Health, which gave PillPack access to data about patient prescription histories, and said it would turn the case over to the FBI.
CVS says it's not indiscriminately rejecting transfer orders, but rather is calling patients when a request is submitted to make sure the customer has asked for it. Many of these patients are older and unfamiliar with the new world of online shopping and mobile apps.
The pharmacies say they're only denying transfers when patients tell them they never signed up for PillPack or have never even heard of it. The issue can be particularly challenging for people with dementia who may not have intended to sign up or not remembered doing so. Brian Caswell, the owner of Wolkar Drug in Kansas, said he's called patients about PillPack requests only to have them deny ever providing consent.
"Could they have clicked on something online and forgot about it?" Caswell said. "It's possible."
There could also be patients who did request a transfer to PillPack but are embarrassed to admit it when their pharmacist calls for confirmation.
The fight with the big pharmacies began almost immediately after Amazon announced the PillPack acquisition in June 2018, for $753 million (though the price wasn't disclosed until later). A month after the deal, CVS sent a cease-and-desist letter to PillPack's lawyers, and Walgreens sent a strongly-worded warning in August, according to people familiar with the matter who asked not be named because the letters were confidential.
Both CVS and Walgreens confirmed that they reached out to PillPack but didn't specify the exact nature of the correspondence.
"We've communicated our concerns directly to PillPack," a Walgreens spokesperson said. "We respect our patients' privacy rights, and strongly believe that patients are entitled to, and benefit from a personal and trusted relationship with their pharmacist."
A CVS spokesperson said that while it's "common practice" for pharmacists to legitimately request prescription transfers from its pharmacies, the company "notified PillPack to stop any activity to initiate prescription transfers without the informed consent of our pharmacy patients."
PillPack responded at the time to both CVS and Walgreens, denying that the company was doing anything wrong.
Here's how a transfer works. A CVS or Walgreens customer sees a PillPack ad on television or online and pulls up the PillPack website or calls a company representative. By phone, PillPack says, patients are asked explicitly if they give the company consent to transfer prescriptions from their current pharmacy. From the website, the patient fills out personal information, includes relevant prescriptions and then clicks a blue button to complete the signup.
Just below the blue button, here's what the fine print says:
"By clicking the 'Finish Signing Up' button above, you consent to PillPack transferring your prescriptions from your existing pharmacies to PillPack and/or contacting your doctors to request new prescription and refills."
From there, a PillPack representative calls or faxes the existing pharmacy and requests the transfer. It's a straightforward process that happens all the time when patients move or when they're traveling and need to pick up a refill before returning home. In the U.S., there are federal and state laws that, with some exceptions, require pharmacists to transfer prescription information to another pharmacy.
However, PillPack said its pharmacists began reporting challenges with patient transfer requests in the weeks after the acquisition was announced. Additionally, the company said it heard reports in July 2018, that CVS hosted a training session for pharmacists, informing them that they should not transfer to PillPack until after they notified patients about the company's rival service.
CVS told CNBC that, starting last year, it recommended its pharmacists check in with customers following a PillPack transfer request after hearing a series of complaints about the company's practices. CVS also said representatives tell customers about the company's own mail-order service but that its pharmacies will facilitate a transfer to PillPack if the patient still wants it.
CVS and Walgreens aren't the only pharmacies concerned about PillPack's actions. Douglas Hoey, chief executive officer of the National Community Pharmacists Association, which represents U.S. pharmacy owners and is one of the owners of Surescripts, said his team has heard from 20 to 30 pharmacists who said they were concerned after patients told them they never authorized transfers to PillPack. Pharmacists have also been vocal on internet forum Reddit, where in several threads some have admitted that they automatically throw PillPack faxes "in the shred bin," or call patients to get confirmation.
Update: This story was updated to say that the National Community Pharmacists Association is a part owner of Surescripts.