Amazon.com (NASDAQ:AMZN) has caused massive disruption to any retail area it enters. Now, the company has made a move that has some CVS Health (NYSE:CVS) shareholders concerned that it will be able to do the same thing in healthcare retail.
The online retail giant bought PillPack for $1 billion in late June. That puts Amazon in the business of selling prescription drugs, positioning it squarely in competition with CVS.
"PillPack makes it simple for any customer to take the right medication at the right time, and feel healthier," said PillPack CEO TJ Parker in a press release. "Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the U.S. who can benefit from a better pharmacy experience."
Anytime a company with the resources and customer base of Amazon enters a new market, existing players should be concerned. CVS could be severely impacted by this deal -- which is expected to close before the end of the year -- and its shares took a hit after the news became public.
CVS stock closed 2017 at $72.50 and was trading at $70.05 at market close on June 27. Once the Amazon news became public on June 28, shares fell, closing the month at $64.35, an 11% drop, according to data provided by S&P Global Market Intelligence.
It's not entirely clear what Amazon's plans are, but it does appear the company expects to move into the prescription drug business. Though that's bad news for CVS, it does have the ability to compete and work to protect its customer base.
Amazon has not devastated every retailer, nor will it wipe out the entire pharmaceutical sales market. Still, this is a major concern for CVS, and we have seen that companies that don't act when Amazon enters their space tend to be harmed more than those that take a more proactive view.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.