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Shares of U.S. drug system players spiked in Monday afternoon trade, after a CNBC report that mammoth online retailer Amazon.com Inc. no longer plans to sell and distribute pharmaceutical drugs.
But other Amazon units could still get into the drug business, which could translate into drugs sold to consumers, said CNBC, and Amazon Business could eventually reconsider pharmaceuticals.
Shares of companies in the pharmaceutical supply chain, that negotiate drug prices, distribute drugs and sell them directly to consumers, rose sharply in heavy Monday afternoon trade. Walgreens Boots Alliance stock rose 6%, CVS Health Corp. climbed 8%, Cardinal Health stock was up 6%, Express Scripts Holding shares rose 2%, AmerisourceBergen Corp. was up 3%, McKesson Corp. gained 5% and Rite Aid Corp. rose 7%. Amazon shares rose 0.9%.
The threat of Amazon’s crushing market power has weighed on pharmaceutical stocks for nearly a year, with speculation of a service allowing consumers order medication via Alexa, with two-day Amazon Prime delivery.
Wall Street analysts have described the possibility as an overhang on the sector amid a relatively benign regulatory environment.
Amazon’s health care venture with Berkshire Hathaway and JPMorgan Chase also sent various company shares tumbling earlier this year.
Is it because they want to spend time thinking about the health care venture they are even less well suited for?
— Craig Garthwaite (@C_Garthwaite) April 16, 2018
Seriously -- if Amazon can't pull off selling drugs to hospitals, how exactly are they going to transform health care? https://t.co/aA63FcdUF8
According to the CNBC report, Amazon Business made its decision for two key reasons: It has not succeeded in getting big hospitals on board, while developing a distribution model for temperature-sensitive drugs has been another challenge.
An Amazon spokesperson declined to comment to MarketWatch, citing the company’s policy of not commenting on “rumors or speculation.”
But in a statement, the spokesperson noted that Amazon Business is hearing from manufacturers and customers that they want ways to make it easier to buy supplies and reduce costs.
Amazon shares have declined 0.2% month-to-date, compared with a 3% rise in Walgreens shares, a 9.5% rise in CVS shares and a 1.7% rise in the S&P 500