Updated–click to see full page. Amazon is the Scary Monster of the healthcare space, a veritable Godzilla unleashed in Tokyo, if one listens to the many rumors, placed and otherwise, picked up in mainstream media which then are seized on by our healthcare compatriots.
According to CNBC’s breathless reporting, they have set up a skunk works HQ’d in Seattle. When they posted job listings, they were under keyword “a1.492” or as “The Amazon Grand Challenge a.k.a. ‘Special Projects’ team.” In late July, these ads for people like a UX Design Manager and a machine learning director with experience in healthcare IT and analytics plus a knowledge of electronic medical records were deleted. Amazon has separate initiatives on selling pharmaceuticals and building health applications to be compatible with Echo/Alexa and other smart home tech. Both have come up in the context of the CVS-Aetna merger, where buying up state pharmacy licenses cannot be kept secret (see end of our 8 Dec article) and that efforts to extend Alexa and Echo’s capabilities aren’t particularly secret.
A quick look at Bezos Expeditions, Amazon supremo’s Jeff Bezos’ personal fund, on Crunchbase reveals several healthcare investments, such as GRAIL (cancer), Unity Biotechnology (aging), Rethink Robotics, and Juno Therapeutics (cancer). Not really things easy to sell on Amazon.
Last week, Amazon reportedly hired Dr. Martin Levine, who ran integrated primary health Iora Health’s Seattle-based clinics, according to CNBC and Becker’s. They met with Iora, Kaiser, and the now-defunct Qliance about a year ago on innovative healthcare models. More breathless reporting: they are hiring a “HIPAA compliance lead.”
What does this all mean? It may be more–or less–than what the speculation is. Here’s what this Editor believes as some options:
- Alexa and Echo are data collectors as well as assistants–information that has monetary value to healthcare providers and pharma. To this Editor, this is the most likely and soonest option–the monetization of this data and the delivery of third-party services as well as monitoring.
- Amazon now employs a lot of people. It is large enough to create its own self-funded health system. It’s already had major problems in the UK, Italy, and even in the US with healthcare and working conditions in its warehouses. Whole Foods’ non-union workers are prime for unionization since the acquisition (and also if, as rumored, robots and automation start replacing people).
- A self-funded health system may also be plausible to sell like Amazon Prime in certain states, especially if selling insurance across state lines actually does happen–or to small companies. It’s the Amazon Web Services ‘excess capacity’ model. Much larger hurdles here in getting state insurance regulators to bless it, but then there’s the tasty leverage of that contest for the second Amazon HQ, with 20 finalists anxiously awaiting the decision this year….50,000 jobs, $5 billion invested….oh, what’s an insurance license between friends? Or a company to buy?
- A first step to this may be the pharmacy licenses they’ve taken a few states–licenses that have been giving the vapors to independent pharmacies, CVS and Walgreens, and feeding speculation that Amazon is moving to become a PBM. PBM is a plausible retail business for Amazon to be in, for companies, to other payers, and DTC. PBM can be easy if they stay under the national wire plus buy one of the delivery services. This puts them up against giants like CVS, Walgreens Boots, and OptumRx, but that has rarely fazed Amazon.
- Updated. An interesting speculation by this Editor ties in with the recent news that four major integrated health systems–Intermountain, Trinity Health, Ascension, and SSM Health, in consultation with the VA, are planning to launch their own nonprofit generic drug company to lower costs, focusing on those prone to shortages and price manipulation. They may set up their own FDA-approved manufacturer or use contract manufacturing organizations. Healthcare Dive. Intermountain release. Putting this together with the above, distribution and supply chain management are not what health systems do, but what Amazon does very well. Once they enter manufacturing, they will have excess–and one way to sell may be through Amazon’s PBM.
What is clear to this Editor is that while Amazon and Mr. Bezos love all this speculation (free media!), what they actually do will center on Making More Money, not losing it. The reality is while Amazon’s market cap is $500bn, its cumulative profitability is dwarfed by Walmart’s in one year alone. Look for horses, not zebras–and that means monetization of what Amazon has, capitalizing on its size, and leveraging (pounding?) hungry cities and states to do its will. Let’s remind ourselves that Amazon has had its fair share of failures, like their Fire phone and lack of traction in their Amazon Studios unit, and short even Amazon Prime subscribers on basics like customer service. Even post-war Tokyo found a way to drive off Godzilla.