Here's why Amazon Pharmacy may be good for the health care industry

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Here's why Amazon Pharmacy may be good for the health care industry

Amazon announced this week a big move into the pharmacy business, sending shockwaves through the industry. Is the tech giant going to take the health-care world by storm or break it? CNBC’s Jon Fortt breaks down both sides of the issue. For access to live and exclusive video from CNBC subscribe to CNBC PRO:

Amazon is entering the pharmacy business with a new offering called Amazon Pharmacy, allowing customers in the United States to order prescription medications for home delivery, including free delivery for Amazon Prime members.

Amazon has been quietly building out its pharmacy offering for several years after ramping up internal discussions in 2017 and acquiring PillPack in 2018. The pharmacy space is notoriously complex and competitive in the U.S., and Amazon Pharmacy is built in part on PillPack’s infrastructure, including its pharmacy software, fulfillment centers and relationships with health plans.

Amazon Pharmacy, announced Tuesday, is the company’s biggest push yet into $300 billion market, and threatens the dominance of traditional pharmacies like CVS and Walgreens, as well as other large retailers that offer pharmacy services, including Walmart.

Pharmacy stocks tumbled following the launch of Amazon Pharmacy. CVS shares fell 8.6% on Tuesday. Walgreens Boots Alliance dropped 9.6%. Shares of Rite Aid slid 16.2%. GoodRx, which helps consumers find discounts on prescription drugs, fell 22.5%. Amazon shares closed slightly higher.

For Amazon, the announcement is well timed. Americans are increasingly relying on getting their medicines via mail to avoid possible exposure to the coronavirus. That shift could be permanent, as more people than ever before are learning about new ways of receiving medication.

“We wanted to make it easy for people to get their medication, understand the cost and get it delivered to the home,” said TJ Parker, Amazon’s vice president of pharmacy, who previously co-founded PillPack. “The hard work is to make it easy … there were a number of complications behind the scenes.”

“We think this new benefit will add tremendous value to our members,” added Jamil Ghani, vice president of Amazon Prime. “It’s relevant as folks try to do more from the comfort and safety of their homes.”

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