By Dana Jacoby
In late July, online retail giant Amazon revealed its plans to take over One Medical, a telehealth and primary care service, in an all-cash deal totaling $3.9 billion. This popular platform offers patients 24/7 virtual care access via a telehealth app on a membership basis. The proposed acquisition is now pending regulatory approval.
What’s notable about this deal is the sheer scale of One Medical’s primary care service, as it covers 200 locations and roughly 770,000 patients US-wide. If the deal is approved, Amazon’s healthcare footprint will become significantly larger. It’s a massive bet, but a crucial step if the company is serious about executing the rest of its healthcare strategy.
Amazon’s Healthcare Journey So Far
Amazon’s first foray into the now $4 trillion healthcare sector came in June 2018 with the acquisition of online pharmacy Pillpack for $1 billion. Later on, in October 2019, the tech giant snapped up medical tech startup Health Navigator in an effort to boost healthcare offerings for employees and their families (at first in the Seattle region, then nationwide).
This service became known as Amazon Care.
There have been some hiccups along the way. In January 2018, Amazon embarked on a partnership with JP Morgan Chase and Berkshire Hathaway to provide healthcare insurance at a more reasonable cost to workers and families at the three companies. But that venture, called Haven, ceased operations in February last year.
However, with its latest move, Amazon can dramatically expand its foothold in the Medicare Advantage market, since One Medical itself acquired the value-based direct primary care provider Iora Health for around $1.4bn in June 2021.
Changing the Way We Perceive Healthcare
What’s clear is that brick-and-mortar-based practices are about to face much stronger competition from non-traditional models that manage to seamlessly blend in-person services with remote care. For now, Amazon’s forte is its set of somewhat routine wellness tools, but the company’s tech muscle gives its M&A strategy considerable reach.
Amazon knows that modern patients want seamless mobile care. In particular, Millennials and Generation Z patients show less loyalty or attachment to traditional providers and are prepared to shop around for price transparency and convenience.
The usual stumbling block with consolidation is the absence of a robust and far-reaching technology platform to roll the services out, complete with superior consumer-friendly access. Amazon doesn’t have that problem, which allows it to accelerate its upcoming services and put them leaps and bounds ahead of more old-fashioned players.
In addition, its fast-growing stable of healthcare assets — Amazon Pharmacy, the Amazon Halo health and fitness tracker, and Alexa-driven systems with health-related skills — puts the company in a strong position to move up the value chain and pivot into chronic disease management.
In effect, the One Medical acquisition sees Amazon adopting the role of a pharmacy benefit manager. Telehealth providers need to step up their game, as Amazon now enjoys access to more healthcare access points and referral points, as well as the ability to harness a treasure trove of consumer data to gain improved insights into consumer behavior.
We can expect M&A activity to heat up and healthcare payers to get more aggressive in the primary care market.