Violation of noncompete agreement cited
Amazon’s (AMZN) efforts to crack the more than $600 billion prescription drug market in the US has suffered a blow, albeit a mild one. A federal judge in Rhode Island ruled on June 18 that a former executive at pharmacy chain CVS Health (CVS) couldn’t work for Amazon’s pharmacy business, PillPack.
According to the judge, allowing former CVS executive John Lavin to take up a job at PillPack, a competitor to his former employer, would violate a noncompete agreement, Reuters reported.
Amazon sends chills down the spines of its competitors
PillPack is an online pharmacy business that Amazon acquired for $753 million a year ago to expand into the drug retailing business. Shares of drugstore companies CVS Health, Walgreens Boots Alliance (WBA), and Rite Aid (RAD) plunged on the news that Amazon was buying PillPack. Amazon is known to give incumbents a run for their money in every industry it attacks. Google (GOOGL) and Facebook (FB), for instance, have been shown in eMarketer reports to be losing market share or struggling to grow as Amazon makes headway in the digital advertising space. Working in Amazon’s favor in its competition for digital advertising dollars is the fact that consumers begin their online shopping journeys on marketplaces instead of general online search engines.
Amazon is pursuing a $610 billion revenue opportunity
Through PillPack, Amazon is pursuing drug sale dollars. About $450 billion was spent on prescription drugs in the US in 2016, and that spending is projected to reach $610 billion by 2021, according to data from IQVIA.