| May 8, 2018

Amazon in Healthcare: How the Online Giant Will Disrupt Healthcare

Healthcare Weekly Staff

The Healthcare Weekly staff brings you the latest in healthcare innovation, technology, news and more. The Healthcare Weekly staff brings you the latest in healthcare innovation, technology, news and more.

There are plenty of challenges and complexities involved in the disruption of healthcare, but Amazon pushes forward. Here is what their latest move in the health game means for you.

What do Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. have in common?

Aside from being some of the most successful US corporations in history, all three companies have fundamentally changed the way business is done around the globe, dominating the marketplace with fierce and unwavering efficiency.

Warren Buffett’s Berkshire Hathaway is the most expensive stock ever, smashing records after closing at more than $250,000 per share in December, 2016.

Leading global banking behemoth JPMorgan Chase is one of the oldest financial institutions in the US; its history extends back over 200 years.

And then there’s Amazon. It is the third largest retailer on the planet, following Walmart and CVS, and, as a singular enterprise, has achieved enviable scale. Known for its ruthless innovation, Amazon has disrupted virtually every industry it enters, from online retail to cloud services and grocery shopping.

These three behemoths have now joined together to disrupt one of the largest industries of all: healthcare. It is an industry with nearly guaranteed growth, and Amazon entering healthcare clearly means that it sees the field as fertile ground for expansion. Together with Berkshire Hathaway and JPMorgan Chase, Amazon is seeking to create solutions to reduce healthcare spending for more than 1 million employees and their families.

This move has yielded fierce debate. Proponents deem the move disruptive, but also see it as a natural diversification opportunity. Skeptics point to Amazon’s lack of expertise in a sector that many consider resistant to the competitive forces that define both web services and the retail market in which Amazon thrives.

As Amazon creates a triumvirate with seemingly endless resources and a proven track record for innovation, what will Amazon in healthcare ultimately mean for the industry? Read on for our thoughts.

 

Amazon in healthcare: the facts

Amazon has transformed the retail landscape with continuous game-changing innovations, and they have already begun taking steps towards doing the same in healthcare.

Amazon in healthcare: the facts

Amazon is already selling medical products, supplies and equipment

While headlines spout Amazon’s recent move into the healthcare space, the company has already quietly launched an exclusive line of over-the-counter health products that could potentially spark a price war and put pressure on store-brand profits.

Although not technically owned by Amazon (its health products are produced by private-label manufacturer, Perrigo) the move to distribute products still puts Amazon in a position to squeeze retailers. Its Basic Care line was launched in August 2017 and includes 60 products, ranging from ibuprofen to hair growth treatment.

And the Amazon Business platform, which essentially serves as a middleman for third-party vendors, already features a variety of medical supplies, including catheters, IV bags, infusion pumps, hospital beds, and other items that are undercutting margins.

AWS is pitching to healthcare customers

Amazon Web Services (AWS) is Amazon’s hugely successful cloud business, and has begun pitching its wealth of services to healthcare customers, while competing head on with cloud giants Microsoft Azure and Alphabet’s Google Cloud.

In an attempt to form new relationships with health startups, Amazon has posted job listings for employees to form networks with large health investors and their portfolio companies.

Of course, companies networking with venture capital firms and startups isn’t anything new, but Amazon adding healthcare into the mix is certainly worth paying attention to.

Amazon is seeing success with voice tech

Although Amazon has long known the potential for voice technologies in homes (think: Alexa), they now have their sights set on its use in clinics and hospitals.

In 2017, as part of a newly formed partnership with drugmaker Merck, Amazon invited several healthcare developers, including diabetes software startup Glooko, to participate in their Alexa Diabetes Challenge. The goal: have developers work on building apps using Amazon’s Alexa voice-recognition software to help diabetics manage their condition.

And this is just the beginning. Hospitals around the country are beginning to experiment with using Alexa for certain documents such as safety checklists, documentation, and transcription.

Amazon is partnering with JPMorgan and Berkshire Hathaway

This brings us to Amazon’s biggest move yet. In January 2018, Amazon partnered with JPMorgan and Berkshire Hathaway to revamp healthcare for their combined workforces of 1.2 million people.

This independent initiative is intended to be free from profit-making incentives. The first goal is to target technology solutions that will simplify the healthcare system. Details on how this might work remain to be seen. In the meantime, the hope is that the sheer number of prospective participants will help bring about the scale and resources needed to undertake this massive initiative.

In light of Amazon’s early moves into healthcare over the past year, from selling products and supplies to bringing voice technologies into hospitals and clinics, this announcement speaks to Amazon’s ambition of disrupting the current healthcare system.

 

What Amazon in healthcare means for you

Amazon and its partners want to build a new type of healthcare company.

How Amazon's entrance into healthcare will affect you

We can all agree on two things: that better efficiency is a good thing in healthcare, and that the medical system is notoriously inefficient.

The US spends more on healthcare per capita than any other developed country. Yet this higher spending is not coupled with better health outcomes. Many have tried—and failed—to mold our bureaucratic system into healthier shape. Any changes Amazon, JPMorgan and Berkshire Hathaway successfully make could significantly impact how we receive our healthcare.

The vast majority of Americans are insured through employers. In his opening statement, Buffett described the swelling costs of the US healthcare system as a “tapeworm” in the economy.

Amazon’s entrance into healthcare, in partnership with two other giants of innovation, more or less means war on the profit margins of such competitors as UnitedHealthcare, who make the majority of their revenue off of individuals’ employer plans.

Any change in the status quo could disrupt this system. Whether Amazon & Co. can successfully conduct this war is another matter, although it’s reasonable to assume employers will get behind any endeavor that might cut costs.

In the end, Amazon is just one more player in a much bigger game. Amazon’s entrance into healthcare, while teaming up with JPMorgan and Berkshire Hathaway, is part of a long-term plan that will only gradually unfold.

At present, though, the future of the U.S. healthcare industry is anything but obvious.

The GOP wants massive cuts to federal spending on healthcare. In contrast, the Democrats are pushing discussions about Medicare for all (among other solutions).

With Amazon leaping into the game — while riding on the coattails of CVS’s recent buyout of Aetna — it looks as if there are plenty of deals to be made on Wall Street as well. Who’s to say Google or Apple won’t try their hand at buying a healthcare company, just to cut their own insurance costs? The possibilities are overwhelmingly unpredictable.

In the midst of this uncertainty, the fact that two of the world’s richest men, and three of the world’s largest companies, have become so frustrated with American healthcare that they believe in spending what will likely be billions of dollars to try and build their own insurer, rather than deal with the current system, speaks volumes about the state of US healthcare.

 

Final thoughts: make room for Amazon

At its core, healthcare delivers valuable services and solutions to customers. What company has become synonymous with seamless and reliable service?

That’s right, Amazon.

Since its inception, Amazon has moved into sector after sector, altering entire industries in its wake. Whether it’s voice-recognition software like Alexa, delivering groceries with Amazon Fresh, cloud computing services with AWS, or simply selling medical supplies through the Amazon Business platform, Amazon CEO Jeff Bezos’s strategy of continuous evolution has allowed the company to experiment and flourish in virtually any arena.

Without a doubt, Amazon is positioning itself to lead the charge towards cloud-based pharmaceutical development and personalized medicine, while simultaneously helping solve some of the largest issues our healthcare system faces.

And as always, they are putting the customer — the patient — first.


BE SOCIAL: Share this article with your network, friends and enemies. The choice is yours

Healthcare Weekly Newsletter

Get the latest in healthcare leadership, news, and innovation.

We don’t share your contact information with any 3rd party

Contact us

Get in touch to learn how we can help

Name

Work Email

Message

Contact us

Get in touch to learn how we can help

Name

Work Email

Message

Thank you for contacting Healthcare Weekly.

We will get in touch with you shortly.