2021 is barely one month old, and it’s already been quite an eventful year for Amazon.
In the first week of January, Amazon, Berkshire Hathaway and JPMorgan Chase announced they were shuttering the joint Haven venture, ending a multi-year project that aimed to disrupt the health care industry. Then earlier this week, the tech giant announced that founder and CEO Jeff Bezos was stepping down this year as CEO and handing off the role to Amazon Web Services (AWS) CEO Andy Jassy in July. Bezos will stay on as Executive Chairman.
In the past few years, Bezos hasn’t been shy about Amazon’s ambitions to grab a slice of the nearly $4 trillion health care market. Other than the Haven venture, Amazon acquired the online pharmacy service PillPack for $750 million; opened a number of health clinics with Crossover Health for its employees across the U.S; and made significant investments with health care enterprises, such as Beth Israel Deaconess in Boston, to test artificial intelligence tools via AWS.
Moreover, Alexa, Amazon’s voice-enabled service, was made HIPAA compliant and Amazon has worked with institutions like Providence in Renton, Washington to transmit protected health information for patients. The company also launched Amazon Care, a virtual health service, for its employees and in October of last year, acquired a company called Health Navigator, which provides technology and services to digital health companies.
When Haven was announced in 2018, Bezos acknowledged the company was going to face a challenge in “reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
Three years later, Haven closed and Bezos is stepping down as CEO. What does that mean for the future of Amazon’s health care plans? Experts expect the company to continue to make investments and start initiatives on the payer, provider, and consumer side. With Bezos continuing as Executive Chairman, the company is not likely to give up on its ambitions any time soon.
“Amazing is still licking its chops”
From the first announcement of Haven, Ian Morrison, health care futurist and author, was certain the venture didn’t have the scale to meaningfully disrupt the incumbent health care system. “They had a million lives collectively, which is less than 1 percent of the privately insured landscape. That’s the key rate limiting factor of any individual or small group of employers trying to make much of a difference,” Morrison says. But that doesn’t mean Amazon’s interests in health care should be completely disregarded.
“Haven has gone to heaven, but Amazon is still licking its chops. To ignore what Amazon could do independently is crazy. They have their eyes set on the 20 percent of the gross domestic product that goes through health care as a market opportunity, not just with their own employees. The punchline from [the downfall of Haven] is to watch Amazon, don’t watch Haven,” Morrison says.
David Blumenthal, MD, President of the Commonwealth Fund and former National Coordinator for Health IT in the Obama Administration, says Amazon’s ability to change the market for health care services through IT platforms doesn’t require the help of the other two companies. Blumenthal, who wrote an article in Harvard Business Review about the Haven collapse, told Health Evolution that in terms of market share within certain areas, Amazon’s grasp on Seattle was the only instance within the Haven arrangement where a company could force local suppliers to change behavior.
Some are optimistic to think that its presence in disrupting local markets could expand beyond Seattle. Array Advisors, a health care facility design and consulting firm, is certain Amazon will become a “comprehensive, digitized health care provider of the future.” The company predicted that Amazon will start an Amazon Prime for health care combining services offered by Amazon Care, the online pharmacy and prescription delivery side, Halo wearables, the neighborhood health clinics, and third-party software. Array’s Catherine Castillo and Neil Carpenter outlined the top 20 potential Amazon health care hotspots, including area need, economics, market willingness and existing footprint.
Ian Morrison, Health care futurist and author
PillPack and online pharmacy
Morrison is optimistic about Amazon’s ability to deliver prescription medications through its PillPack acquisition. “Amazon can put things on your front doorstep. The sheer delivery system that Amazon has created means a good deal of mail-order and over-the-counter pharmaceuticals goods and services, home testing products…all of that stuff can be Amazon-ified easily over time,” Morrison says.
In November of last year, the company officially launched Amazon Pharmacy, which allows customers to complete a pharmacy transaction on a desktop or mobile device through the Amazon App. The announcement came with an added bonus for Amazon Prime members, who would receive unlimited, free two-day delivery on orders from Amazon Pharmacy. They also launched an Amazon Prime prescription savings benefit for members.
“PillPack has provided exceptional pharmacy service for individuals with chronic health conditions for over six years. Now, we’re expanding our pharmacy offering to Amazon.com, which will help more customers save time, save money, simplify their lives, and feel healthier,” Doug Herrington, Senior Vice President of North American Consumer at Amazon, said in a statement announcing the move.
The PillPack acquisition and subsequent moves have opened the eyes of many companies within the pharmaceutical and payer space. UnitedHealth, parent company to OptumRx, a large pharmacy benefit manager, acquired online pharmacy startup, DivvyDose, for $300 million in September of last year. Also, Alto Pharmacy, another online pharmacy company, received significant funding in 2020.
However, at least one industry observer, Adam Fein, CEO of Drug Channels Institute, wrote in a post-news analysis in November that Amazon was essentially “choosing to join the drug channel, not fundamentally change it.” He says the moves by Amazon basically are a copy of drug discount website GoodRx’s partnership with pharmacy benefit manager, Express Scripts. GoodRX CEO, in an interview after the announcement, argued that while “Amazon’s move could ultimately allow more people to get cheaper prescriptions by mail, pharmacies have had trouble convincing customers to switch to mail prescriptions.”
Challenges and opportunities
Olivia Webb, Policy Analyst at the American Economic Liberties Project, isn’t certain Amazon can succeed in disrupting health care either. She wrote in an article that Amazon’s own ambitions in health care may have sunk Haven. She said that unlike the other two companies, Amazon had its eyes on a bigger prize than just lowering costs and improving outcomes for its employees.
But Webb says that the “antitrust winds” [from government regulators] may be potentially inhibiting Amazon’s forays into health care. “They might build a better consumer experience, which they obviously have done in delivering things, but it comes at a huge societal cost and in many cases, a cost to the consumers when they are the main deliverer and can raise prices,” Webb says. “But they are making moves in the pharmaceutical space. It will be interesting to see what happens.”
Beyond PillPack, Amazon Care and the aforementioned investments with AWS and health care institutions, Morrison says Amazon could impact the health insurance industry another way. The company has started dipping its toes in the distribution of health insurance products. In April, it sent a survey to various sellers to determine whether they were satisfied with current insurance products. The company has already done this in other markets, such as in India with its Acko subsidiary.
“That’s potentially quite disruptive because there is a lot of excess payment, administrative costs and waste in the [health insurance] brokerage channels. Think about travel? Who knows a travel agent anymore? Everyone uses online services except for very rich people who don’t have the time to go online. There is an enormous amount of financial leakage in the commercial and small group insurance market, the cost of sales in enrolling people,” Morrison says.
As for Bezos handing over the CEO post, it’s still too early to predict what his future holds. Early word out of Amazon was that as Executive Chairman he will remain involved in important initiatives, while also having more time to allocate toward the Amazon Day 1 Fund, Bezos Earth Fund, Blue Origin space company and The Washington Post.