>> Amazon announced on Thursday it's buying little known online pharmacy PillPack, the e-commerce giant's latest salvo into the bloated healthcare industry. And the news quickly wiped out about $30 billion of the valuation of drugstore chains, distributors, and insurers. Reuters Breakinviews columnist Rob Cryan tells us why.>> Selling prescriptions is a very highly regulated business.
And with the deal, it means Jeff Bezos's firm now has licenses to sell drugs in 50 states. Amazon's profit margins are about 3% North America. Companies like CVS and Walgreens have a profit margin about 5%, this means there's lots of room for cost cuts.>> And that means price wars could follow.
Amazon shares rose about 2%, meanwhile shares of CVS, Rite Aid, and Walgreens all took a big hit.>> Stefano Pessina, the CEO of Walgreens, said he's not particulary concerned about Amazon's entry. He says things like selling drugs is a very complicated business cuz you have to fill prescriptions, do all these other things.
However, he may regret those words. Other CEOs have said similar things about other businesses and Amazon's conquered those categories.>> The news is particularly nerve wrecking for the healthcare industry as Amazon has partnered with JP Morgan Chase and Berkshire Hathaway to cut U.S. employee healthcare costs. And last week, the company's appointed well known surgeon and author, Atul Gawande to lead the new company they will form.
All steps the traditional healthcare firms worry will disrupt their industry, too.