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Will Amazon disrupt Australian pharmacies?

The shares of pharmacy chain operators and distributors Australian Pharmaceutical Industries Ltd (ASX: API) and Sigma Healthcare Ltd (ASX: SIG) will be on watch on Friday after retail giant Amazon acquired online pharmacy startup PillPack.

No fee was disclosed in the market release, but fellow retail giant Walmart had previously been linked with a US$1 billion acquisition of the four-year old online pharmacy.

Shares in U.S. pharmacy chains CVS Health and Walgreens Boots Alliance fell as much as 9% on Wall Street amid fears that Amazon will disrupt yet another industry.

What is PillPack?

PillPack is a full-service pharmacy that sorts medication by the dose and delivers it to the door of consumers in 49 U.S. states.

According to the company’s website, it is a service that saves time, headache, and hassle. Something highly valued for today’s time-poor consumers.

Are Australian Pharmaceutical Industries and Sigma Healthcare in danger?

If the acquisition proves to be a success then I feel it is inevitable that one day Amazon will roll out the service in the Australian market.

If this were to happen then pharmacy chains operated by the two companies including Priceline, Amcal, Soul Pattinson, and Chemist King could potentially lose market share to Amazon.

Which is the last thing they need right now given the tough trading conditions that they are facing.

Should you sell?

Whilst I think it would be some time before Amazon launches the service here (if at all), I like to invest with a long-term view.

So with both these companies underperforming at the moment, and Sigma likely to lose a key supply contract next year, I see little reason to be holding onto their shares with this potential disruption coming further down the line.

In light of this, I would suggest investors stay clear of these companies and focus on shares that have more positive outlooks such as CSL Limited (ASX: CSL) and Kogan.com Ltd (ASX: KGN).

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia has recommended Amazon and Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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