Amazon has been in the headlines disrupting markets for years, but over the past few months, we have seen more and more news about the company’s ambitions in healthcare. From the alliance with JPMorgan Chase and Berkshire Hathaway that Dr. Atul Gawande has been appointed to lead to the purchase of PillPack, Amazon is clearly serious about healthcare. The question now is how far will Amazon, the master disrupter, take this?
The answer: very far, it’s safe to assume. Anyone who continues to think of Amazon as just a very big digital retailer needs to think again. The company has repeatedly shown that it has the capabilities, the patience and the deep pockets to disrupt industry after industry. Healthcare is no exception. There are at least three reasons to believe Amazon is has a good shot. First, as one of the largest private employers in the United States, Amazon would reap huge financial benefits from lowering the high cost of healthcare in this country. Second, the numerous inefficiencies of the healthcare system present enticing avenues for Amazon to explore, and as CEO Jeff Bezos has famously stated, “Your margin is my opportunity.” Finally, healthcare is just the kind of big, complex problem that Bezos likes to sink his teeth into. An unabashed “Star Trek” fan with a utopian view of the future, Bezos has always aspired “to boldly go where no one has gone before.” Bezos strongly believes that Amazon has a role to play in making things better.
As Amazon turns its focus to healthcare, we believe there are four potential points of entry, with increasing levels of complexity from simple product distribution.
- Durable medical equipment and medical supplies
Amazon has already taken steps here: It currently sells a broad array of general medical supplies and durable medical equipment (DME) to consumers and given its existing B2B ecommerce platforms, expansion into wholesale distribution is a logical next step. In fact, the company has already obtained licenses to distribute medical supplies directly to providers in a variety of medical settings in the majority states. In those states, licensed professionals can enroll in the Amazon Business Professional Healthcare program to order restricted-access products.
- Mail-order and retail pharmacy
The PillPack acquisition shows that Amazon clearly has mail-order pharmacy players in its sights. Even before PillPack, it had secured approval as a wholesale distributor from multiple state pharmaceutical boards, and now it has a new platform from which to build. While the company faces some hurdles in complying with drug storage and distribution regulations, these challenges are hardly insurmountable now. Amazon has a range of assets it can use to accelerate the PillPack business, from retail outlets in the form of Whole Foods to industry leading customer data and predictive analytics, to be a formidable competitor to incumbents.
- Pharmacy benefit manager
PBMs leverage the combined purchasing power of health plan enrollees to lower prices for prescription drugs, a strategy with which Amazon is certainly familiar. Because the PBM market is fairly consolidated, Amazon would most likely enter the space through partnership or acquisition to give it access to the requisite claims adjudication systems and networks of pharmacies. Its relationship with millions of Amazon Prime customers makes it an attractive partner for a PBM, and its data-analytic capabilities could be leveraged to improve patient compliance and health behaviors.
- AI powered telemedicine, diagnostics or in-home healthcare
The three points of entry discussed above leverage Amazon’s capability in logistics and distribution, as well as its ability to negotiate rock-bottom prices. But the company’s reach is much broader with more than 20 million of its smart speaker products, the Echo, sold in the U.S. to date, the possibilities for rolling out a host of new voice-activated healthcare services are extensive. Indeed, Bezos has talked publicly about the role for Alexa in the future of healthcare delivery. Machine learning drives many of Amazon’s offerings, from its customer recommendation engine to optimization at its service centers. A conceivable next step for Amazon could be to use its AI capabilities to turn Echo into an in-home diagnostic tool, without the need for a human doctor.
To live long and prosper, keep Amazon on your radar
Many people, including business executives, continue to view Amazon through the lens of their personal experience as consumers — meaning they tend to think of it as an online retailer. But dismissing Amazon as a master mover of boxes would be a big mistake. At its core, it is a technology company, and it is driven by a central belief that technology can be applied to most problems.