Amazon just bought a tiny startup most people have never heard of and it's scaring the heck out of pharmacy shareholders (CVS, WBA, RAD)

  • Amazon said it will buy online pharmacy PillPack, marking its latest push into the healthcare industry.
  • The announcement reverberated through the entire supply chain, with the stocks of pharmacies and drug wholesalers getting hit hard.
  • This is just the most recent example of Amazon's ability to disrupt an entire industry with a single corporate action.

Amazon announced on Thursday that it has signed an agreement to acquire PillPack, an online pharmacy.

PillPack's business is built around customers who take multiple daily prescriptions. It offers medications in pre-sorted dose packaging, coordinates refills, and handles shipments.

The deal — for which terms were not immediately disclosed — marks Amazon's latest push into the healthcare industry. In January, the company announced a collaboration with JPMorgan and Berkshire Hathaway to reduce healthcare costs for US workers.

"PillPack's visionary team has a combination of deep pharmacy experience and a focus on technology," Jeff Wilke, Amazon's CEO of worldwide consumer said in a release. "PillPack is meaningfully improving its customers' lives, and we want to help them continue making it easy for people to save time, simplify their lives, and feel healthier."

RELATED: Amazon CEO Jeff Bezos through the years

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Amazon CEO Jeff Bezos
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Jeff Bezos, Chairman and CEO of Amazon, speaks at the George W. Bush Presidential Center's Forum on Leadership in Dallas, Texas, U.S., April 20, 2018. Picture taken on April 20, 2018. REUTERS/Rex Curry
Amazon founder and CEO Jeff Bezos laughs as he talks to the media while touring the new Amazon Spheres during the grand opening at Amazon's Seattle headquarters in Seattle, Washington, U.S., January 29, 2018. REUTERS/Lindsey Wasson
2018 Vanity Fair Oscar Party ? Arrivals ? Beverly Hills, California, U.S., 04/03/2018 ? Amazon CEO Jeff and wife MacKenzie Bezos. REUTERS/Danny Moloshok
Amazon founder and CEO Jeff Bezos (L) answers a question from the media while getting a tour from Ron Gagliardo, senior manager of horticultural services for the Spheres, during the Amazon Spheres opening event at Amazon's Seattle headquarters in Seattle, Washington, U.S., January 29, 2018. REUTERS/Lindsey Wasson
Amazon and Blue Origin founder Jeff Bezos addresses the media about the New Shepard rocket booster and Crew Capsule mockup at the 33rd Space Symposium in Colorado Springs, Colorado, United States April 5, 2017. REUTERS/Isaiah J. Downing
Amazon founder and CEO Jeff Bezos looks over a balcony on the top floor of the Amazon Spheres during an opening ceremony event at Amazon's headquarters in Seattle, Washington, U.S., January 29, 2018. REUTERS/Lindsey Wasson
Amazon founder and CEO Jeff Bezos gives some closing comments after opening the new Amazon Spheres with some help from Alexa during an opening event at Amazon's headquarters in Seattle, Washington, U.S., January 29, 2018. REUTERS/Lindsey Wasson
Amazon and Blue Origin founder Jeff Bezos addresses the media about the New Shepard rocket booster and Crew Capsule mockup at the 33rd Space Symposium in Colorado Springs, Colorado, United States April 5, 2017. REUTERS/Isaiah J. Downing
Jeff Bezos, founder of Blue Origin and CEO of Amazon, speaks about the future plans of Blue Origin during an address to attendees at Access Intelligence's SATELLITE 2017 conference in Washington, U.S., March 7, 2017. REUTERS/Joshua Roberts
Jeff Bezos, founder of Blue Origin and CEO of Amazon, speaks about the future plans of Blue Origin during an address to attendees at Access Intelligence's SATELLITE 2017 conference in Washington, U.S., March 7, 2017. REUTERS/Joshua Roberts
Jeff Bezos, founder of Blue Origin and CEO of Amazon, arrives to speak about the future plans of Blue Origin during an address to attendees at Access Intelligence's SATELLITE 2017 conference in Washington, U.S., March 7, 2017. REUTERS/Joshua Roberts
Amazon CEO Jeff Bezos addresses the Economic Club of New York in New York City, U.S., October 27, 2016. REUTERS/Brendan McDermid
Jeff Bezos, owner of The Washington Post, delivers remarks at the grand opening of the Washington Post newsroom in Washington January 28, 2016. REUTERS/Gary Cameron
Jeff Bezos, owner of The Washington Post, delivers remarks at the grand opening of the Washington Post newsroom in Washington January 28, 2016. REUTERS/Gary Cameron
Jeff Bezos, owner of The Washington Post, delivers remarks at the grand opening of the Washington Post newsroom in Washington January 28, 2016. REUTERS/Gary Cameron
Jeff Bezos, founder and CEO of Amazon.com, leaves the Allen and Co's annual media conference in Sun Valley, Idaho July 10, 2014. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS)
Amazon CEO Jeff Bezos talks about his company's new Fire smartphone at a news conference in Seattle, Washington June 18, 2014. Bezos unveiled a "Fire"smartphone on Wednesday equipped with a 3D-capable screen and the ability to recognize objects, music and TV shows, hoping to stand out in a crowded field dominated by Apple Inc and Samsung Electronics. REUTERS/Jason Redmond (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS TELECOMS)
Amazon CEO and Chairman Jeff Bezos receives the Citation of Merit on behalf of the Apollo F-1 Search and Recovery Team at the 110th Explorers Club Annual Dinner at the Waldorf Astoria in New York March 15, 2014. The club, which promotes the scientific exploration of land, sea, air and space featured catering by chef and exotic creator Gene Rurka. Chef Rurka prepared a variety of dishes featuring an array of insects, wildlife, animal body parts and invasive species. REUTERS/Andrew Kelly (UNITED STATES - Tags: SOCIETY SCIENCE TECHNOLOGY BUSINESS FOOD)
Amazon.com Chief Executive Officer Jeff Bezos speaks during a keynote speech with Amazon.com Chief Technology Officer Werner Vogels at the AWS Re:Invent conference at the Sands Expo in Las Vegas, Nevada November 29, 2012. REUTERS/Richard Brian (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS)
Amazon CEO Jeff Bezos (R) arrives at the annual Allen and Co. conference at the Sun Valley, Idaho Resort July 12, 2013. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS HEADSHOT)
BERLIN, GERMANY - APRIL 24: Jeff Bezos attends the Axel Springer Award 2018 on April 24, 2018 in Berlin, Germany. Under the motto 'An Evening for' Jeff Bezos receives the Axel Springer Award 2018. (Photo by Franziska Krug/Getty Images)
Jeff Bezos, founder and chief executive officer of Amazon.com Inc., tours the Spheres during opening day ceremonies at the company's campus in Seattle, Washington, U.S., on Monday, Jan. 29, 2018. The Spheres, a new gathering and working space for Amazon employees located in the heart of the downtown Seattle Amazon campus, contains hundreds of plant species from cloud rainforest environments around the globe, and maintains a tropical climate similar to Costa Rica or Indonesia. Photographer: Mike Kane/Bloomberg via Getty Images
WASHINGTON, DC -DEC 14: Jeff Bezos, founder of Amazon.com (and owner of the Washington Post) arrives at the movie premiere tonight. -The world premiere of the movie, 'The Post' took place at the Newseum in Washington, D.C. tonight. All of the major stars of the movie and director Steven Spielberg attended as well as many local politicians and business people such as Warren Buffett. (Photo by Michael S. Williamson/The Washington Post via Getty Images)
Jeff Bezos, founder and chief executive officer of Amazon.com Inc., center, tours the Spheres during opening day ceremonies at the company's campus in Seattle, Washington, U.S., on Monday, Jan. 29, 2018. The Spheres, a new gathering and working space for Amazon employees located in the heart of the downtown Seattle Amazon campus, contains hundreds of plant species from cloud rainforest environments around the globe, and maintains a tropical climate similar to Costa Rica or Indonesia. Photographer: Mike Kane/Bloomberg via Getty Images
Amazon CEO Jeff Bezos arrives for the premiere of 'The Post' on December 14, 2017, in Washington, DC. / AFP PHOTO / Mandel NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
WASHINGTON, DC - OCTOBER 28: Honoree Jeff Bezos speaks at the 21st Annual HRC National Dinner at the Washington Convention Center on October 28, 2017 in Washington, DC. (Photo by Paul Morigi/Getty Images)
NEW YORK, NY - DECEMBER 14: Jeff Bezos, chief executive officer of Amazon, listens during a meeting of technology executives and President-elect Donald Trump at Trump Tower, December 14, 2016 in New York City. This is the first major meeting between President-elect Trump and technology industry leaders. (Photo by Drew Angerer/Getty Images)
NEW YORK, NY - OCTOBER 27: (L to R) Jeff Bezos, Chairman and founder of Amazon.com and owner of The Washington Post, addresses the Economic Club of New York as moderator Charlie Rose looks on, at the Sheraton New York Times Square Hotel, October 27, 2016 in New York City. Bezos discussed the future of Amazon, space travel, and his ownership of The Washington Post. (Photo by Drew Angerer/Getty Images)
SAN FRANCISCO, CA - OCTOBER 20: Founder/chairman/CEO of Amazon, Jeff Bezos, speaks onstage during 'The Prime of Mr. Jeff Bezos' at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 20, 2016 in San Francisco, California. (Photo by Michael Kovac/Getty Images for Vanity Fair)
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Pharmacy stocks in the US market dropped on the deal announcement, most notably CVS (-8.1%), Rite Aid (-3.1%), and Walgreens Boots Alliance (-9.2%).

The damage also spread throughout the entire pharmacy supply chain, with drug wholesalers seeing deep losses. Cardinal HealthAmerisourceBergenMcKesson, and Express Scripts all dropped more than 3% on the news.

Amazon's ability to rock an entire industry

Pharmacy shareholders will perhaps find solace in the fact that they're not the only industry to have billions in market value erased by one simple Amazon announcement. It's a trend that's been playing out repeatedly over the past year, with grocery stores, athletic apparel retailers, and package-delivery services among the afflicted groups.

The reasoning is simple — Amazon has a ton of cash and an unparalleled logistical network, and when it looks poised to enter or expand its position in a market, traders get scared and bail out of existing holdings in other companies.

And if Amazon's torrid stock performance in recent months is any indication, the company's shareholders love the deal activity, among other fundamental drivers. The firm's shares have spiked 435% since the beginning of 2015, more than 14 times the return for the benchmark S&P 500 over the same period.

Getting one up on Walmart

Amazon's acquisition of PillPack is sure to rankle the business development team at Walmart, which was reportedly looking at buying the pharmacy startup in early April.

As Business Insider's Lydia Ramsey has pointed out in the past, the two rivals are locked in a battle to reach the elderly market, which is expected to double by 2050 from where it was in 2012.

An aging population means we'll see an increase in health concerns and chronic conditions like heart disease, neurodegenerative diseases, and cancer that can be costly to manage. It also offers a business opportunity for those companies best placed to meet the healthcare needs of this growing population.

Based on Thursday's news, Amazon appears to have the leg up, at least for now. Stay tuned for the latest twists and turns as the nation's largest corporations battle for healthcare supremacy.

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