Health Boxes move along a conveyor belt at the Inc. fulfillment center on Cyber Monday in Robbinsville, New Jersey, U.S., on Monday, Nov. 30, 2015. Online sales on Cyber Monday may rise at least 18 percent from a year earlier, slower growth than during the holiday weekend, as consumers start their Internet shopping earlier, according to forecasts by International Business Machines Corp. Photographer: Michael Nagle/Bloomberg via Getty Images
Why Amazon’s Whole Foods Deal Is Slamming Pharma Stocks, Too

News that Amazon is buying health-focused grocery chain Whole Foods shook the business world Friday. The $13.7 billion deal has, predictably, been a veritable albatross round the necks of Kroger, Costco, and other large supermarkets and retailers. But the proposed buyout is also taking a toll on some of the biggest pharmacy chains and drug distributors in America.

CVS (CVS, -3.78%) and Walgreens (WBA, -4.99%) shares were down nearly 4% and 5.5%, respectively, on Friday afternoon. That’s no joke for companies which hold well more than $70 to $80 billion in market value. Express Scripts, the nation’s largest pharmacy benefits manager, fell about 0.5%; McKesson, the largest wholesale drug distributor in the country (and No. 5 on this year’s Fortune 500 list with $192 billion in revenue) saw its stock drop nearly 2.5%.

Click here to subscribe to Brainstorm Health Daily, our brand new newsletter about health innovations.

So what’s leading to all this pharmaceutical heartburn over a grocery-retail deal? A CNBC report from May holds some clues: Amazon has reportedly been hiring veteran pharmaceutical talent in a potential bid to launch a drug delivery and online pharmacy business. CVS and Walgreens shares dipped more than 3% on that news when it broke.

And the prospect of an Amazon-Whole Foods marriage could, at least in investors’ minds, hasten that reality—or at least make it easier for Amazon to break into the pharmacy space with the advantage of brick-and-mortar locations which may be more palatable for patients picking up their prescriptions.

This wouldn’t be an easy process by any means. Breaking into pharmaceuticals, online or otherwise, would involve a whole lot of regulatory wringing that Amazon hasn’t had to deal with thus far. But some investors are clearly spooked by the prospect already.

Related Post

Leave a comment