With Amazon’s mid-2018 acquisition of online pharmacy startup PillPack, drugstores across the U.S. began readying for battle with the online retail giant.
PillPack is a startup prescription mailer that packages, organizes, and delivers drugs to consumers. Prescriptions also arrive packaged together according to when they are meant to be taken.
News of Amazon’s purchase caused stock prices for major drugstore retailers to falter. In November, Amazon applied for some pharmaceutical licenses, which led analysts to infer that the company was planning to service its own employees via PillPack, which would mean more than 500,000 Americans no longer getting their prescriptions filled by the likes of RiteAid, CVS, or Walgreens.
Drug Giants Come Out Swinging
CVS Health in June launched home delivery services for customers nationwide, at a $4.99 fee. In larger markets, such as New York and San Francisco, the company also offers same-day delivery for $8.99. CVS’ delivery service partners with the U.S. Postal Service.
Walgreens, meanwhile, announced in December a partnership with FedEx to offer next-day delivery. FedEx already offered prescription delivery for $19.95, but with the new partnership, called Walgreens Express, the cost is now competitive with CVS, at the same $4.99 price tag.
Same-day delivery is also in the works at Walgreens for certain markets, with an expanded rollout expected this year. The fees for the same-day service vary but will be competitive, according to a Walgreens spokesperson.
It’s all about offering consumers the convenience they need, said Walgreens president of operations Richard Ashworth. “Walgreens is driven by a desire to make health care accessible to all across the thousands of communities we serve,” Ashworth stated. “This expansion of our alliance with FedEx illustrates our commitment to making filling prescriptions as fast and easy as possible.”
The shakeup in the pharmaceutical industry shifts priorities for drug retailers, as well. As the Wall Street Journal noted, “Chains have gone from looking for the best locations to building stronger logistics networks.” And it’s no wonder; pharma e-commerce is rising fast. In the first quarter of 2018, for instance, almost 10% of the $1.3 in retail sales came from online purchasing, up 16.4% from the same period in 2017.
Consumers’ embrace of e-commerce is changing demand dynamics across verticals. The delivery partnership between FedEx and Walgreens is only one example of how the two businesses are looking to evolve and better meet customers’ needs in today’s quickly shifting landscape. Last year, FedEx put delivery lockers in some Walgreens pharmacy locations to allow for quick pickup, allowing Walgreens to gain foot traffic while streamlining FedEx driver routes.
CVS Health is also taking the initiative to fight back against Amazon by trying to curtail costs through supply chain streamlining via the $69 billion acquisition of Aetna, which closed in November but is still in federal review.
Pharmacies of the Future
As consumer desires continue to shift, pharmacies are forced to rethink their business models and expand their offerings. Amazon’s foray into the health care sphere signals a turning point, with major drugstore chains across the nation looking for new ways to stay competitive.