Amazon is continuing with expand its product catalog with the purchase of PillPack and its services by investing in delivery vans.
Amazon announced on Thursday that they are buying PillPack. The news is another blow to other online drug retailers. Investors showed how highly they regard Amazon’s business with a drop of 7 percent for Walgreens and CVS. Other retailers, including Cardinal Health, McKesson, and AmerisourceBergen also dropped in value.
Forty-nine states have authorized PillPack to deliver prescription drugs. They purchase the medications, and over-the-counter medications and supplements at wholesale prices. They then take orders and organize shipments for individual customers.
Walmart tried to buy them in April for less than $1 billion. Amazon has not yet disclosed how much they are buying the company for. They will finalize the deal with PillPack later this year.
Amazon has been making moves into the pharmaceutical territory since January. That was when they, JPMorgan, and Berkshire Hathaway announced their joint venture. Their goal is to reduce healthcare costs to encourage economic growth in other sectors. Part of their strategy is to cut waste, and PillPack fits that model perfectly.
Furthering Delivery Services
At the same time, Amazon is attempting to fulfill their own order deliveries via a franchise system. They are offering entrepreneurs incentives to create their own delivery service for Amazon deliveries.
The company will purchase and brand delivery vans. They will then lease the vans at low rates to new delivery businesses. Amazon will also provide uniforms, insurance programs, fueling plans, and even business classes to help the delivery companies get started.
Amazon says that an owner could start an Amazon delivery service for less than $10,000. That’s if they’re a one-person operation. It would cost more to hire other drivers.
Dave Clark is the senior vice president of worldwide operations at Amazon. He said that if a company leased 40 vans, they could earn a profit of $300,000 per year. Amazon has not yet said what they will base their payments to companies on. Some speculate that it will be per mile, others that it will be per delivery, still others a percentage of the sale per delivery. It could also be a shared revenue source from Amazon Prime membership fees.
They will also continue the Flex program, paying individuals for making deliveries via their personal vehicles.