Amazon Killed Traditional Pharmacy This Morning
One Medical Kiosks, Medicare Muscle and Cut-Rate Tactics Expose CVS & Walgreens' Stupid Pharmacy Blunders
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Amazon
Amazon is wasting no time pillaging the pharmacy market from under CVS and Walgreens. In its latest power move this morning, Amazon Pharmacy announced it will start filling prescriptions via electronic kiosks inside its One Medical clinics – its first in-person pickup service – to “reduce barriers to access and limit shipping costs,” according to the company. Launching in Los Angeles, the kiosks will stock common drugs (think antibiotics, inhalers, blood pressure meds) for One Medical patients, letting them grab prescriptions on-site instead of waiting on the mail. The strategy is obvious and ruthless: by embedding pharmacies directly into primary care locations it already owns (Amazon bought struggling One Medical in 2023), Amazon cuts out the costly delivery middleman. As one Amazon executive put it, “if you put inventory closer to customers, your shipping costs go way down and your demand goes way up”.
Amazon is turning its clinics into fulfillment centers – and making the old drugstore model look antiquated.
This kiosk gambit is just the latest in Amazon’s aggressive offensive to undermine the incumbent pharmacy giants. CVS Health and Walgreens still control about 40% of U.S. prescription volume (vs. Amazon’s paltry <1% share), especially through Medicare Part D, but Amazon clearly intends to change that. Over 11,000 Americans turn 65 each day, and Amazon is swooping in to capture them. It has rolled out a caregiver tool enabling families to manage an older relative’s meds through their own Amazon account, expanded its PillPack service (pre-sorted monthly pill packets) to 50 million Medicare Part D users, and even launched RxPass, a $5/month all-you-can-need generic drug subscription. Amazon is directly partnering with pharma manufacturers like GSK and Novo Nordisk to auto-apply coupons at checkout, instantly shaving down patients’ out-of-pocket costs. Prime members are enticed with steep pharmacy discounts – up to 80% off thousands of medications when paying cash – undercutting the traditional drugstore pricing model. Every one of these moves extends Amazon’s footprint in seniors’ healthcare and chips away at CVS and Walgreens’ dominance. The message is clear: while the old pharmacy chains bumble through ill-fated acquisitions and store closures, Amazon is busy engineering a cheaper, slicker, techyer but also “senior-friendly” pharmacy ecosystem.
Walgreens
Meanwhile, CVS and Walgreens are stumbling over themselves with financially disastrous strategies that now look almost comically bad. Walgreens Boots Alliance in particular has provided a master class in how not to do healthcare. Remember Walgreens’ much-hyped acquisition of VillageMD primary care clinics? It has already gone down as “one of the worst acquisitions in stock market history”, as Walgreens’ board itself admitted by firing CEO Roz Brewer in 2023 for that blunder. The result: Walgreens posted its first-ever annual loss in 122 years thanks largely to this money pit. In fact, tiny VillageMD – a business line accounting for just 3.3% of Walgreens’ revenue – managed to contribute a whopping 50% of Walgreens’ $3B net loss for 2023. That’s right: a niche side venture tipped a century-old company into the red for the first time ever. Investors were apoplectic. Walgreens stock promptly nosedived 22% in one day, crashing to lows not seen since 1997. Wall Street got the memo that this venture was a bust. Walgreens has been frantically unwinding its primary care foray – essentially writing off the VillageMD fiasco as a giant mistake. The new CEO took a massive “big bath” charge, writing down $5.8B on VillageMD’s value and slashing costs, a tacit admission that the company squandered nearly $10B on buying clinics that are practically worthless now. Few corporate faceplants have been this spectacular: Walgreens incinerated so much capital on VillageMD and its Summit Health buy that those investments together exceed the entire market cap of the company today. It’s a pharmacy soap opera of stupidity and hubris – and Amazon must be grinning ear to ear.
Walgreens’ free fall finally hit rock bottom when Sycamore Partners scooped up the wreckage in August 2025. A private equity firm picking through the bones of a century-old American icon. Charles R. Walgreen has to be turning in his grave. It took a hundred years to build and just one disastrous move to burn it all down. Stunning…
CVS
CVS Health’s leadership should be blushing too, because their own moves look equally stupid in hindsight. Desperate not to be outdone in the “buy primary care at any price” craze, CVS dropped a cool $10B to acquire Oak Street Health’s clinics – a deal that has become an albatross around CVS’s neck. Oak Street has been a loss-making quagmire from day one, hemorrhaging hundreds of millions of dollars a year (it logged roughly a $510M loss in the year before CVS bought it). It turns out you can’t magically turn unprofitable clinics profitable just by slapping the CVS logo on the door. Healthcare CEOs seem to think they can “conquer primary care” like a commodity, when in reality:
Primary care ain’t like Scrub Daddy or Bombas Socks – it’s not scalable or easily commoditized.
Indeed, CVS’s shiny new Oak Street clinics have yet to show any upside. Instead they’ve burdened CVS with integration headaches and a gaping hole in the balance sheet. Investors question why billions were blown on a business the company knows “jack about”. These supposed strategic masterstrokes now look like financial self-sabotage.
In glaring contrast, Amazon is executing a lean and mean playbook that highlights just how out-of-touch the old guard has become. Rather than sink tens of billions into buying brick-and-mortar clinics it doesn’t understand, Amazon is leveraging its core strengths – logistics, technology, and price aggression – to eat the pharmacy lunch of CVS and Walgreens. By placing prescription kiosks inside One Medical facilities (which Amazon smartly snapped up for $3.9B, a fraction of what CVS and Walgreens wasted on their deals), Amazon turns each clinic into a mini pharmacy hub at virtually no incremental cost. No standalone drugstores, no white-elephant acquisitions – just an integration of doctor’s office and pharmacy counter. And unlike the pharmacy dinosaurs, Amazon, with its massive scale, makes it dirt-cheap and effortless for patients: from pre-sorted pill packs for seniors to one-click refills and free same-day delivery for Prime members, the value proposition is worlds better than waiting in line at CVS. Amazon’s cost structure and scale mean it can undercut on price while still offering convenience that CVS and Walgreens can’t touch.
The bottom line is brutal: while CVS and Walgreens have been busy writing down their insanely overpriced purchases and apologizing to Wall Street, Amazon is poaching their customers by (maybe?) offering a better deal. The pharmacy incumbents’ recent moves weren’t just missteps – they were stupid strategic errors in the face of an e-commerce behemoth that is rewriting the rules of the game.
And now, with Amazon’s latest kiosk initiative, the message to CVS and Walgreens couldn’t be clearer. Adapt or die. Amazon is coming for you, armed to the teeth with a superior business model, greater scale, and far better technology.
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Boy, when physicians tried to open pharmacies to provide convenience for patients, Stark III laws prohibited this. Conflict of interest, they said. Inappropriate financial gain from referrals, they said.
So why is it allowed now?
Also worth noting that Rite Aid just died, this time for good.