Amazon.com Inc. today announced plans to acquire PillPack Inc., a startup that provides an online alternative to traditional pharmacies, in a move to capture a bigger slice of the healthcare market.

The acquisition triggered an immediate reaction from Wall Street. Drug store giants CVS Health Corp., Rite Aid Corp. and Walgreens Boots Alliance Inc. saw the value of their shares collectively lose as much as $12.8 billion amid investor concerns over future competition from Amazon.

That may be an overreaction. “We think the acquisition may not have as negative an impact as the market makes it out to be,” Cowen & Co. analyst John Blackledge said in a note to clients. “With PillPack AMZN is now just another retail pharmacy player in a large market.” Moreover, it doesn’t appear PillPack is geared for specialty drugs, a fast-growing part of the market.

Still, Wall Street has good reason to attribute so much significance to the deal, given the e-commerce giant’s track record of disrupting traditional industries. The importance of the transaction is reportedly also reflected in the acquisition price. Sources told TechCrunch that Amazon is paying “just under” $1 billion for PillPack, a hefty premium seeing that PillPack was last valued at $361 million, according to financial tracking service PitchBook.

The deal buys Amazon a highly streamlined online pharmacy operation. PillPack is licensed to ship prescriptions in all 50 states and uses a homegrown system called PharmacyOS to manage the logistics. According to the startup, the software handles everything from refills to the minutiae of dealing with insurance companies.

Consumers receive their medicine in presorted packages that arrive by mail. PillPack has a relatively small market presence compared to CVS and the other industry leaders, but Amazon could scale up the operation by tapping into its massive logistics network. The e-commerce giant divulged in a regulatory filing earlier this year that it had spent $21.7 billion on shipping during 2017 alone.

The PillPack acquisition adds yet another dimension to Amazon’s push into the healthcare sector. The Wall Street Journal reported in February that the company is also expanding its existing medical supplies business, which already ships more than $1 billion worth of hospital beds, infusion pumps and related products a year.

Moreover, Amazon is working with Warren Buffett’s Berkshire Hathaway Inc. and JPMorgan Chase & Co. on a joint venture that will provide healthcare services to their more than 1 million employees. The companies last week appointed noted surgeon-writer-researcher Atul Gawande to head the yet-unnamed organization.

Amazon expects to complete the acquisition of PillPack sometime later this year.

With reporting from Robert Hof

Image: PillPack