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Amazon is vying for a share of what is a more than $450 billion total U.S. prescription drug market, according to research firm IQVIA.

Amazon and PillPack said they expected to close the deal by the end of the year, subject to regulatory approval.

Amazon's acquisition of PillPack follows a larger-though less defined-move into the healthcare sector for the online giant. In early morning trading, CVS Health Group shares are down 8.75 percent. The company had previously been linked to a potential deal with Walmart for under $1 billion according to CNBC.

The damage also spread through the pharmacy supply chain, with drug wholesalers seeing deep losses.

PillPack also declined to comment but disclosed that it has tens of thousands of customers and brought in more than $100 million in revenue previous year.

Its national reach made it an attractive prospect for Amazon, said Adam J. Fein, chief executive of the Drug Channels Institute, who studies the industry.

Its software platform, PharmacyOS, was built in-house and helps customers manage their pill intake with real-time notifications and an online dashboard.

Experts said buying the company outright will allow Amazon to develop and scale a mail-order pharmacy business more quickly than if it had to develop the expertise from scratch.

With Amazon's announcement Mizuho analyst Ann Hynes, in a note, said pending health insurer/PBM mergers of Aetna Inc with CVS and Cigna Corp with Express Scripts "are even more critical now". On an earnings conference call, Walgreens CEO Stefano Pessina faced multiple questions from analysts about the PillPack deal. "We're all just waiting and tapping our foot to see the actual policy".

The deal comes as the health care industry is undergoing a series of convulsions in response to rising costs and pressure on drug makers, pharmacy benefit managers, and insurers.

'At this juncture we are not anxious about Amazon's entrance into the prescription market, ' Cantor Fitzgerald analyst Steven Halper said in a note.

TJ Parker, co-founder and CEO of PillPack, said in a statement.

Amazon will pay about $1 billion for Boston-based PillPack, according to a person familiar with the matter.

Amazon's acquisition of Somerville-based PillPack, an online pharmacy startup, marked the company's first internal foray into the health care industry, and sent ripples through the stock market as pharmacy retail stocks plunged.


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