The stocks of distributors Cardinal Health and McKesson and retailer CVS Health rallied yesterday after a report that Amazon.com had put off its plans to sell drugs to hospitals and other businesses.

When Amazon.com Inc. makes a move, so do broader markets. After it was reported yesterday that Amazon Business had backed off its plan to sell and distribute pharmaceutical products to hospitals and healthcare clinics, the stocks of major pharmaceutical distributors and retailers rallied.

Amazon’s supply chain ambitions might not be as big as feared.
Eric Coldwell, healthcare industry analyst
Robert W. Baird & Co.

The report by CNBC said little about whether Amazon would ultimately enter the broader retail prescription-drug market, but the idea that the online giant might not take on one segment of the supply chain was enough to send shares of pharmacies and drug distributors surging. Bloomberg has previously reported that Amazon’s health efforts have been mostly focused on selling basic medical supplies to physician offices and hospitals.

Distributor Cardinal Health Inc. was up as much as 6.4%, and distributor McKesson Corp. gained up to 5.5%. Cardinal Health and McKesson

Among retail chains, CVS Health Corp. rose as much as 8.7%, the biggest intraday gain since December 2011. Drugstore chain Walgreens Boots Alliance Inc. was up as much as 6.8%. Neither company’s main business is selling directly to hospitals or doctors.

Shares of drug-supply-chain stocks have been in a tizzy for months over what Amazon might do to enter the pharmacy or pharmaceutical-supply business.

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Amazon declined to comment on the CNBC report.

“This is not necessarily an all-clear event for the supply chain,” Eric Coldwell, an analyst at Robert W. Baird & Co., said in a note to clients. “Still, it’s a good reminder that Amazon’s supply chain ambitions might not be as big as feared or valuations indicate.”

Hospitals and doctors’ offices are an attractive target for Amazon Business, a marketplace launched in 2015 to help Amazon expand its reach into workplaces and factories by selling industrial and office products. Ownership of hospitals and doctor’s offices is highly fragmented but the businesses need many of the same supplies. Amazon says that it can pool their buying power and share the savings, while improving distribution. Amazon is No. 91 in the B2B E-Commerce 300.

The market for hospital drugs is distinct from the retail prescription market, which is focused on generic and brand-name pills and other basic drugs bought at retail or mail-order pharmacies. Hospital drugs, by contrast, more often come in sterile injected formulations to allow nurses to administer them to sick patients.

Many hospitals already belong to group purchasing organizations that negotiate discounts on drugs and other products, and may be reluctant to uproot established purchasing procedures, given their need to maintain a surefire supply of life-sustaining drugs.

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