Over the last few years, Amazon AMZN has been scooping up companies in the general healthcare field. As was the case with retail groceries, Amazon is moving along in a determined way, progressively building its footprint in a giant industry. Competing with Walmart WMT in the supermarket business is no mean task. Healthcare may be no less daunting: Let’s start with a few observations.
For a company like Amazon, the enormous healthcare field poses many strategic alternatives. The industry encompasses many employees, and includes many distinct businesses all of them arguably in need of efficiency and digitalization. This includes pharmaceuticals, assisted living, hospitals, elder care, testing services, digital health services, local clinics, special and complex surgery and care. Also: Uniforms, food service and cleaning, including disposal of dangerous substances.
The pharmaceutical industry is populated with big firms that create miraculous cures, including Pfizer PFE , Johnson & Johnson JNJ and others. These firms feed an ecosystem of drug sellers and deliverers that present what looks like a classic opportunity for Amazon, which could use its dominant distribution network to go after CVS CVS , Walgreens WBA and other hybrid healthcare organizations.
CVS has a strong profile — and is part of a holding company that also owns health insurer Aetna — but its market cap has fallen over the past 18 months from $140 billion to $97 billion. Walgreens, part of a holding company that has been gobbling up assets like Duane Reade, is valued at around $18 billion, down from about $41 billion. Amazon could look to compete or to acquire.
Amazon’s strategic advantages include:
- Strong balance sheet ($70 billion in cash alone)
- Greater comfort with high technology
- Superior knowledge of delivery and related services
- Delivery speed and accuracy (features that consumers need and like!)
- Most customers can use delivery rather than standing in line
- A wide range of known and respected sub-brands, most notably Prime
Amazon has already made a number of valuable healthcare acquisitions. These include the 2018 acquisition of PillPack (Private), an online pharmacy. (Does this remind you of Amazon’s Whole Foods buy?) The price tag for PillPack was $753 million. Two years later, they launched Amazon Pharmacy. No surprise: it is a prescription and delivery service. Leveraging one of its strategic advantages, the deal was all cash. This year, Amazon acquired OneMedical, a primary care network.
This line, on a web post by AARP, speaks for itself:
“Amazon Prime members are automatically enrolled in Amazon’s new PrimeRx prescription drug benefit and can get a 40 percent to 80 percent discount off the cash price of generic and brand-name drugs.”
Could telehealth be next? Following Amazon’s pattern, Doxys (Private) and Teladoc TDOC , which has a market cap of $3 billion, might be worth watching. According to Nova One Advisor, telehealth is advancing rapidly: The industry may reach $310 billion by 2030, with a projected 2022-2030 CAGR of 45%.
Telehealth is attractive, but many people prefer the personal touch. Never asleep at the wheel, the Jeff Bezos monolith also doled out $3.9 billion (all cash!) for One Medical, a primary care provider.
Since Amazon believes in its model for success, all of these services under the Amazon umbrella may well go worldwide. At this point, we are watching an emerging situation. Pretty soon, it may emerge rapidly.