#Amazon Pharmacy announcement sends stocks of drugstore chains tumbling

Amazon just handed the nation’s pharmacy chains a tough pill to swallow.

The e-tailing giant on Tuesday launched Amazon Pharmacy, a new online store that will allow customers to order prescription drugs directly to their homes.

The news sent shares of CVS tumbling 8.6 percent, while Rite Aid plummeted 16 percent and Walgreens Boots Alliance fell 9.6 percent on fears that the drugstore sector is the latest to land in Amazon’s crosshairs.

Amazon Pharmacy will ship common medicines like insulin and asthma inhalers, as well as generic or brand-name drugs. The new service won’t sell opioids or other drugs that are at higher risk of theft. The service requires a doctor’s prescription, like at a regular pharmacy, and will accept most insurance.

Customers will be able to speak to pharmacists 24/7 via the company’s site, and will give customers the option to compare prices of different drugs, as well as quickly switch between a co-pay and non-insurance option. Prime members using the service will receive “up to 80 percent savings” on generic drugs when paying without insurance, and up to 40 percent on name brands, the company says.

Over the past two years, Amazon has worked to secure more state licenses for shipping prescriptions across the country, which had been an obstacle to its expansion into the drug supply chain, according to analyst notes from Jefferies Equity Research.

Whether Amazon Pharmacy will be a real rival to the nation’s biggest pharmaceutical companies remains to be seen. Online startups hawking discount prescription drugs have been around for years, but have yet to make a big dent in the industry.

“They don’t have the relationships with employers, who are the ones who determine coverage,” said Steven Halper, an analyst at Cantor Fitzgerald. “It’s not as easy as selling books and lightbulbs.

“When you look at the larger retail pharmacy business, they’re sort of nibbling at the edges,” he added. “Of the hundreds of millions of prescriptions filled across the United States, only 5 percent are cash pay with no insurance.”

The move comes two years after Amazon’s $753 million acquisition of online pharmacy PillPack, which sorts its customers’ drugs by day and dose, and delivers the pills to its patients on a monthly basis. PillPack will remain a separate service. Amazon Pharmacy is instead meant to save customers time and money instead of going to the pharmacy.

TJ Parker, PillPack’s CEO and vice president of Amazon Pharmacy, said in a statement the retailer aimed to bring “customer obsession to an industry that can be inconvenient and confusing.”

In response to the announcement, a CVS spokesman said, “New entrants to the highly competitive pharmacy market come as no surprise to us. But CVS Health is a lot more than pharmacy—and pharmacy is a lot more than just delivering drugs.”

Amazon Pharmacy discounts will also work at brick-and-mortar pharmacies, with Amazon saying it has partnered with more than 50,000 nationwide. Customers who buy drugs with their Amazon Prime membership will also receive the same two-day shipping available on all the company’s other products.

But Halper said that he views it as unlikely that customers would elect for two-day shipping over visiting a pharmacy that has their drugs in stock.

“Online is only good with chronic meds,” he said. “If your kid has an ear infection, you can’t wait two days. You need that antibiotic today.”

Shares of Amazon rose 0.2 percent to close at $3,135.66.