Drug Supply Disruption: Amazon, Walmart Reportedly Vying For Online Pharmacy PillPack

Walmart Inc (NYSE: WMT) reportedly wants to acquire online pharmacy PillPack but could have one notable obstacle in its way: competition from Amazon.com, Inc. (NASDAQ: AMZN).

The Analyst

Bernstein health care services analyst Lance Wilkes.

The Thesis

PillPack is an online pharmacy that delivers prescription drugs to customers and was founded in 2013, Wilkes said in a research report. The company is backed by multiple venture capital firms; it was valued at $330 million in 2016 and could be sold to either Walmart or Amazon for under $1 billion, the analyst said. 

Walmart and Amazon both have similar low margin, market share first strategies, so an acquisition by either company will "negatively impact" the entire drug supply sector's margins, Wilkes said.

On Walmart's end, an acquisition of the online pharmacy would be consistent with its health care and pharmacy space business, with a particular focus on seniors. PillPack's value proposition targets seniors with multiple prescriptions, and Humana Inc (NYSE: HUM), a close Walmart partner, is also a leading MA MCO.

On the other hand, interest from Amazon in PillPack would be consistent with its desire to enter and disrupt the pharmacy market.

Price Action

Walmart shares were nearly flat at the time of publication, while Amazon's stock was lower by 1.65 percent. 

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