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Walgreens and CVS Fall, Amazon Eyes Pharmacy Benefit Business

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Walgreens and CVS Fall, Amazon Eyes Pharmacy Benefit Business PART 1 OF 1

Walgreens and CVS Fall, Amazon Eyes Pharmacy Benefit Business

Amazon talks with pharmacy benefit managers

According to analysts at investment bank Leerink Partners, Amazon (AMZN) is reportedly in talks with some of the mid-market pharmacy benefit managers. It’s looking to pursue a mail-order pharmacy—reported by Axios on September 20.

Amazon is making “an effort to get into various contract arrangements” with the pharmacy benefit managers. Initially, Amazon might target uninsured customers or clients with high deductibles who pay mostly in cash.

Pharmacy benefit managers are third-party administrators who provide healthcare management and administration services mainly to insurance companies, Medicare Part D plans, state government employee plans, and corporations.

However, Amazon can’t enter into the business immediately. It will take ~18–24 months for Amazon to get drug licenses in all 50 states.

Walgreens and CVS fell after the news

Walgreens Boots Alliance (WBA) and CVS Health’s (CVS) stock prices fell after the news. The two companies each fell 2.9% on September 20.

Walgreens and CVS Fall, Amazon Eyes Pharmacy Benefit Business

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Currently, Walgreens is sitting at year-to-date losses of 4.7%, while CVS has risen 2.3% to date. The two companies form ~9% of the Consumer Staples Select Sector SPDR Fund (XLP).

CVS Health is one of the largest pharmacy benefit managers in the US. In 2007, CVS Health acquired Caremark to expand its footprint in the business.

Express Scripts (ESRX), a pharmacy benefit manager, rose 1.3% during the day. Rite Aid (RAD), which owns the pharmacy benefits business, stayed positive and rose 1.7%.

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