by Jeff Engel
Walmart is reportedly talking with PillPack about acquiring the online pharmacy and medication management company, a deal that would strengthen the retail giant’s healthcare offerings and potentially help it fend off Amazon if the Seattle e-commerce company starts selling prescription drugs.
The PillPack acquisition talks were first reported by CNBC and later confirmed by other media outlets, including Bloomberg and Axios. All of the reports rely on anonymous sources. A source with some knowledge of the discussions described them to Xconomy as “serious talks, but not a done deal.”
A PillPack spokeswoman declined to comment to Xconomy, and a Walmart spokesperson declined to comment to CNBC.
PillPack, which launched its service in 2014, ships pre-sorted prescriptions in individual time-stamped packs to help customers take their meds properly. (PillPack’s pill containers are pictured above.) The Boston-area company also manages customers’ refills by coordinating with their doctors and insurance providers. The service can be particularly useful for seniors—a key customer group for Walmart (NYSE: WMT)—and others who take several medications for multiple conditions.
Last year, PillPack rolled out software it developed to more easily manage the process of filling prescriptions, monitor insurance claims, and enable communications between insurers, doctors, and patients. That product, called Pharmacy OS, replaced outside software the company previously used.
PillPack, which has business operations in Somerville, MA, and a primary pharmacy in Manchester, NH, said in a November blog post that it expected to generate more than $100 million in revenue in 2017. The company has raised $118 million in venture funding from a group of investors that includes Accel Partners, Accomplice, CRV, Founder Collective, Menlo Ventures, Sherpa Ventures, and Techstars, according to its website.
As Axios pointed out, acquiring PillPack would give Walmart an online-based pharmacy to go along with its network of brick-and-mortar pharmacies. Walmart has been beefing up its e-commerce offerings in recent years—scooping up the likes of Jet.com, Bonobos, and ModCloth—to help it compete with Amazon (NASDAQ: AMZN) and others.
Now, Walmart appears to be getting more aggressive in healthcare. Media outlets reported last week that Walmart was discussing a deeper partnership or merger with health insurer Humana (NYSE: HUM). If it goes through, that acquisition would almost certainly be a much larger deal than for PillPack—Humana’s market valuation is about $39 billion, as of this writing.
Other recent, relevant deals include drugstore chain CVS Health’s (NYSE: CVS) $69 billion agreement to buy health insurer Aetna (NYSE: AET), and health insurer Cigna’s (NYSE: CI) planned $52 billion purchase of pharmacy benefit manager Express Scripts (NASDAQ: ESRX). (PillPack is a member of Express Scripts’ network of pharmacies, and the partners had a contract dispute two years ago that could have resulted in PillPack losing thousands of customers. The dispute was resolved within a few weeks, the Boston Globe reported.)
Meanwhile, Amazon is also making moves in healthcare. It said in January that it was partnering with Berkshire Hathaway and JPMorgan Chase (NYSE: JPM) to launch a nonprofit joint venture aimed at lowering healthcare costs. Amazon also now sells an exclusive line of over-the-counter medications and other health products, CNBC reported in February. One of the questions is whether the e-commerce behemoth will become a prescription drug seller.
The overarching takeaway is that the traditional lines between retail, healthcare, and insurance are being redrawn. We’ll see whether that ends up being as beneficial for consumers and patients as it might be for the businesses making the deals.