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Your 4 top questions on Amazon in health care, answered

During our webconference last month about Amazon's health care moves, your peers asked dozens of questions about Amazon's strategy. Here are four of your most-asked questions:

Download the slide deck: What 'Amazon health care' could look like in 5 years

1. Given what we know about Atul Gawande and his background, where are you most significantly seeing his fingerprints on Haven?

You ask a great question. We can already see Gawande's influence on Haven by taking a look back at the company's initial goals, and comparing them to the three main goals now touted on their website.

In Jamie Dimon's 2017 annual letter to stakeholders, he said the venture would start working on addressing six "critical problems and issues" in the U.S. health care system including:

  • Aligning incentives among patients, physicians, and insurers;
  • Determining why specialized and costly treatments are frequently over- and under-utilized;
  • Developing improved wellness programs, targeting obesity and smoking;
  • Examining the amount of money spent on administration, fraud, and waste;
  • Examining why an "extraordinary" amount of money is spent on end-of-life care; and
  • Empowering employees through access to health care data and telemedicine.

Now, Haven has narrowed its focus to three main goals, which are, according to their website, to:

  • "Make primary care easier to access;
  • Insurance benefits simpler to understand and easier to use; and
  • Prescription drugs more affordable."

Compare these goals and you can see that the company seems to have moved away from addressing more systemic issues with the health system (i.e., high spending in administration and in waste) to targeting more concrete solutions—an approach that Gawande has long championed. That's not to say that Gawande doesn't have grand ambitions to lower costs—he certainly does and has been a vocal critic of high prices—but he likely wants to do so more gradually by starting to focus on more concrete goals. For instance, as both a scientist and a leader at Ariadne Labs, Gawande has been adamant about testing evidence-based approaches in pilots and then expanding them if the evidence supports doing so. The new company seems to be approaching its implementation strategy "step-by-step" in the same way.

You'll also notice that the new goals introduce a focus on increasing access to primary care. I think this is certainly driven by Gawande, as he's been such a strong advocate for having primary care doctors be the champions and coordinators for a patient's care. However, I'm surprised that the venture dropped the focus on end-of-life care, as this has been another key focus area for Gawande. I would suspect that has more to do with the venture's focus on their own working-age employees rather than a lack of interest on Gawande's part. Perhaps as the company's focus expands beyond its own employees (as Dimon has recently hinted it will), this end-of-life focus will return. 

2. Do you see Amazon buying or partnering with a major MedSurg distributor (ex. Cardinal, Medline, Owens & Minor)?

I don't think we're likely to see a major partnership between Amazon and a large distributor given distributors' general tone toward Amazon. For instance, Cardinal Health has adopted a pretty competitive tone when discussing Amazon, and McKesson's Managing Director Tom Rodgers has said that large supply chain distributors regard Amazon with fear and "low-level paranoia." Plus, there has been pretty wide-scale consolidation in the supply chain industry (for instance, Becton Dickinson bought C.R. Bard and Cardinal acquired Medtronic's medical supply business), which means the companies are less likely to need to partner with another large player like Amazon. However, they may partner on smaller, more narrowly-focused projects. Owens & Minor already sells some of its products on Amazon's Business marketplace, and I think it's likely that other distributors would follow suit with lower-end, less complex supplies.

As far as Amazon buying one of these distributors, my guess is the distributors would only be willing to sell their business to Amazon were they to face increasing margin pressure. Right now, many of the large companies are facing declining revenues and margins (McKesson, for instance, had around 7% growth year-over-year for the past few years, but that has lowered to around 1.5% recently). If their investors start to get antsy, it's possible that these companies could sell off their lower-end supply chain businesses to Amazon—if Amazon was interested. So far, Amazon's acquisition business have largely focused on consumer-focused companies that offer a "highly differentiated consumer experience" and tend to be smaller. The major distributors don't fit neatly into this historical mold. Yet, if Amazon's supply chain ambitions continue to struggle, as a recent UBS survey found, they may be willing to break from this precedent.  

3. Do you think Amazon might first test their health care concepts internationally where it may be easier to implement?

I think that is certainly possible. Several leading health systems have begun testing innovative new international models, like Ascension's partnership with Australia-based Ramsay Health Care to create a global health care supply chain. This partnership allows the organizations to both seek out new suppliers internationally as well as build new economies of scale that necessary to compete globally.

Amazon is no stranger to international health care partnerships. The company has been working with Indian diagnostic company De. Lal PathLabs to implement Amazon Web Services' (AWS) IT infrastructure for lab test results; Indonesian health care app Halodoc to use AWS to automate operations; and Australian Murdoch University's Centre for Comparative Genomics to use AWS for faster genome research processing.

Most, if not all, of these partnerships are focused on the AWS platform, which is likely easiest for Amazon to scale internationally (as the internet and cloud storage are pretty much the same anywhere in the world). However, I think scaling health care projects that could be relevant to the U.S. health care system would prove more difficult due to the United States' unique regulations, structure and reimbursement models.

Two opportunities in which Amazon may have the best potential to score international crossover are through Haven and AI. Some of Haven's efforts to revolutionize primary care and use technology to empower patients could certainly be translated into international care settings. Haven CEO Gawande has experience in testing concepts internationally, like using checklists to improve maternal mortality in India (although not necessarily with the best outcomes). I also think Amazon's AI for clinical trial results has potential to streamline data processing for global clinical trials. Swiss pharmaceutical company Roche is already using Amazon Comprehend Medical to extract longitudinal information from patients' medical records. However, these efforts might be harder in Europe in particular, where stricter data regulations may provide Amazon less publically available data to train their algorithms on.

4. Who do you see as potential winners in the telehealth space? Could Amazon acquire American Well or Teladoc?

While it's hard to predict winners in the telehealth space, I believe that four major competitors have a significant chance to impact the industry. Those are, in order of the number of times their apps have been downloaded, American Well, Doctor on Demand, Teladoc, and MDLive.

Of these companies, there are two that stand out to me ad forerunners in the space: American Well and Teladoc. AmericanWell has made major waves by acquiring acute care-focused telehealth startup Aviza, and has announced high-profile partnerships with Samsung, Medtronic, and Phillips. Teladoc, meanwhile, has launched a global telehealth platform which supports care in 20 languages, partnered with Partners Health to launch an on-demand application, and paired up with CVS MinuteClinic for an app-based telehealth platform. It also announced partnerships to study telehealth with major AMCs, including Jefferson Health, USC, and Northwestern.

That being said, the telehealth space is expanding rapidly—the global market is expected to surpass $167B by 2025—so I think there's space for several companies to succeed.

Based on Amazon's health care acquisitions, it appears the company is first focused on its pharmacy strategy (mostly via its acquisition of PillPack). Reports said Amazon was also considering acquiring Confer Health, a home health diagnostics testing start-up that aims to compete with testing giants like LabCorp and Quest Diagnostics. Had Amazon pursued this home-health centered approach, they likely would have also pursued telehealth as a complementary strategy. However, because Amazon chose pharmacy as their primary option, their telehealth acquisition strategy likely has been put on the backburner. Still, I don't think that makes it impossible in the future, particularly depending on whether Haven pursues a telehealth-centered approach.

If Amazon does look to enter the telehealth business, it's more likely to acquire a smaller telehealth start-up than one of the major players. American Well, for instance, is backed by more than $500 million in investor capital with pretty stable investors, while Teladoc has already gone public. I would expect that, if Amazon chose to find a telehealth partner, they would choose one that offers services beyond just a platform (which they could replicate pretty easily using Alexa's Echo video devices), and one that is fairly new to the market. Lemonaid Health or a company with a specific focus like Ro, Nurx, and Hims would be the leading candidates in my mind.

Want to learn more about Amazon's strategy and what "Amazon health care" could look like in 5 years? Download the slide deck of our full presentation to learn far more about the company's strategy to disrupt the industry.

Download the Slides






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