Shares of drugstore companies are tumbling after Amazon announced it signed an agreement to acquire online pharmacy PillPack.
Rite Aid plunged 11.1%, Walgreens Boots Alliance sank 9.9%, and CVS Health fell 6.1%, respectively. The three companies collectively lost approximately $11 billion in market value on June 28 alone. Conversely, Amazon shares rose nearly 2.5%, adding more than $19.8 billion in market value.
PillPack is an online pharmacy that packages, organizes and delivers presorted doses of medications. Its website says it is licensed to ship prescriptions in 49 states. In November, its CEO said it was on track to post more than $100 million in revenue for 2017.
Investors have long expected that Amazon would disrupt the pharmacy business. In May 2017, CNBC reported Amazon was hiring people to break into the multibillion-dollar market. In October, the St. Louis Post-Dispatch reported that Amazon had received approval for wholesale pharmacy licenses in at least 12 states, a report that sent these same stocks reeling that day. All three stocks—Walgreens, CVS, and Rite Aid—are down more than 10 percent the last 12 months, in part because of this fear.
More than 4 billion prescriptions are ordered in the U.S. every year. An estimated $300 billion was spent on prescription drugs by patients, insurance companies and other parties in 2015.
The terms of the deal were not disclosed. The companies expect it to close during the second half of the year. PillPack raised $118 million from venture capital firms including CRV and Menlo Ventures.
One Wall Street analyst believes the acquisition will hurt the valuations of drug supply companies.
Walgreens shares were down slightly more than 1% in June 28’s premarket session after the company reported its third-quarter earnings results and announced a $10 billion share buyback, before trading sharply lower on the Amazon-PillPack news release.
Drug distributor stocks AmerisourceBergen and Cardinal Health dropped more than 4%, while McKesson fell 6% on the news.