The deal is expected to close in the second half of 2018.
Founded out of Boston in 2013, PillPack invites customers to sign up online, and the company then dispatches "over-the-counter" and prescription medications in individual packs organized by date and time.
PillPack sells pre-sorted packets of prescriptions drugs, delivering them to customers in their homes.
The acquisition by Amazon comes as a range of companies are exploring mergers that could disrupt the health care system. Earlier this year, Amazon CEO Jeff Bezos, along with fellow CEOs Warren Buffett of Berkshire Hathaway Inc. and Jamie Dimon of JPMorgan Chase & Co., announced an unnamed venture to tackle healthcare access and costs for their employees. Bloomberg reported that an unnamed source with knowledge of the matter said that Amazon will pay about $1 billion for PillPack.More news: US Supreme Court won't rule on 'Making a Murderer' case
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The transaction sets up a showdown between Amazon and pharmacy-benefit managers including Express Scripts Holding Co., which recently agreed to be acquired by health insurer Cigna Corp., and CVS Health Corp.
The deal seems to have spooked shareholders of major pharmacy stocks, like Rite Aid (-11.11%), Walgreens Boot Alliance (-10.5%) and CVS (-7.8%), all of which together lost more than $12.8 billion in market value on Thursday. PillPack is meaningfully improving its customers' lives, and we want to help [PillPack] continue making it easy for people to save time, simplify their lives, and feel healthier. He took on the $800 billion grocery industry with last year's purchase of Whole Foods, and broke into consumer electronics with the creation of the Kindle e-reader and Echo voice-controlled speaker.
"I think this is a fundamental step for Amazon, to begin to attack the pharmacy industry", said Adam Fein, president of Pembroke Consulting and an expert on the drug supply chain.
Some analysts played down the immediate threat Amazon poses.
According to the cnbc.com story, this isn't the first time that news about Amazon sent drugstore stocks falling. It counts Accel Partners, Atlas Venture, CRV, Founder Collective, Menlo Ventures, Sherpa Ventures, Techstars among its investors.