The inside story of why Amazon bought PillPack to crack the $500 billion prescription market.
It was May 2018, and PillPack CEO TJ Parker was in Seattle to meet with a small contingent from Amazon.
On June 28, Amazon announced that it was buying PillPack for an undisclosed sum , snapping up a company that delivers most of the medications consumers can get from their local drugstore packaged in convenient white packets so people will remember to take them, along with automatic refills and 24/7 customer support.
CNBC spoke to a dozen people close to the founders, including investors, friends and PillPack employees for this story, most of whom asked not to be named because of confidentiality agreements. PillPack declined to make Parker or Cohen available for an interview, and neither have spoken publicly since the deal was finalized. Amazon declined to comment and Kabbani didn't respond to a request for comment.Spending on U.S.
PillPack has spent years going through the hard work of getting licenses to ship to every state except Hawaii, and built a system that automatically manages refills and works with insurers on behalf of customers. It sorts pills and provides dispensers to make everything as easy as possible for users.
Amazon has to contend with the added problems that come with a disparate ecosystem of physicians, insurance companies and medical records providers, all with their own silos and disconnected systems. Amazon and PillPack may be able to create a better experience for consumers when it comes to delivering medicines, but playing a role in fixing the other inefficiencies may be out of their purview.
He went to pharmacy school at the Massachusetts College of Pharmacy and Health Sciences in Boston and, while there, would periodically go to events at nearby MIT to look for students exploring innovative work in health technology. That's where he met Cohen, who was attending business school after studying computer science at the University of California at Berkeley. At MIT, Cohen co-founded a program called Hacking Medicine for students interested in medical entrepreneurship.
"TJ used to talk at all-hands about the local CVS, where you'd see aisles stacked with three-liter bottles of Coke with fluorescent lights and grey carpeting," said AJ Resnick, a director of analytics at Pillpack from 2015 to 2016. In his mind, that"wasn't the experience that people deserve." Then consumers caught on. By the time of last year's acquisition, the business was on track to generate $299 million in annual revenue, with plans to more than double in 2019 to $635 million before reaching $1.2 billion in 2020, according to a pitch deck viewed by CNBC. Those are big numbers for a company founded just five years earlier, and proved there was plenty of demand for what PillPack was offering.
By early 2018, it was becoming clear that Amazon could be an ally or a competitor. Parker chose the former option. One effort underway involves large insurers, who could offer the mail-order service as a perk to their members, and in return provide the company with potentially millions of new customers.
Messina, who joined PillPack's board in November 2017 along with former Treasury Secretary Larry Summers, laid out an aggressive campaign that involved setting up the website fixpharmacy.com to rally support from existing customers in an effort to reach key policymakers in Washington. Parker set up a war room at the office, where top staffers put in 16-hour days on the #fixpharmacy crusade.
"He thought that the only way to make a change is to shine a light on the dark spots, and he had the information on where those dark spots were," said Zachariah Reitano, CEO of men's health start-up Roman, which counts Parker as an investor."He did it in a way where it benefited the patient, and not just for the benefit of his company."
Amazon is staffing up the business to serve tens of thousands more customers and adding the necessary pharmacists and pharmacy technicians. Amazon has about 50 PillPack job openings listed on its careers site, primarily in Boston and Somerville.
In Arizona, PillPack has been lobbying local officials to allow pharmacy technicians, the people who assist pharmacists, to transfer medications from other pharmacies into PillPack. A handful of employees and a PillPack lawyer showed up at an Arizona State Board of Pharmacy meeting in December to request an exemption from a law that requires pharmacists to handle transfers that come in by phone.
Though Parker and Cohen report to Kabbani, the founders are very much the ones leading the charge. Kabbani is a respected manager who has risen through the ranks at Amazon, helping build the Kindle self-publishing platform and then leading a variety of last-mile delivery projects, including Flex, the on-demand delivery hiring service.
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