5 ways Amazon could disrupt healthcare
Just about everyone paying attention in healthcare is wondering exactly what Amazon has up its sleeve. After inking an alliance with JP Morgan Chase and Berkshire Hathaway in late January, then expanding into the Medicaid market to take on retail rival Walmart, the Seattle giant appears to be amassing a number of puzzle pieces.
Exactly how they will all fit together remains to be seen. Indeed, L.E.K. Consulting asserted that what healthcare has seen thus far from Amazon is just a hint of the lasting disruption that’s to come.
"Anyone who thinks of Amazon as just a very big digital retailer needs to think again," L.E.K Managing Director Rob Haslehurst wrote in a new report. "They have continually expanded their business model and today they are a leader in cloud computing, a provider of in-home services and a bricks-and-mortar food purveyor in addition to their e-commerce offerings. They have repeatedly shown that they have the capabilities, the patience, and the deep pockets to disrupt industry after industry. Healthcare is no exception."
L.E.K. Managing Director and report co-author Joseph Johnson noted that Amazon has a roadmap it can follow to move deeply into the healthcare industry. He suggested that Amazon could drive down prices and margins while transforming customer behavior.
L.E.K. outlined five promising points of entry Amazon could take into the healthcare space:
1. Durable medical equipment and medical supplies. Johnson pointed out that Amazon already sells a broad array of general medical supplies and durable medical equipment. Building on its logistics and distribution savvy would make it easy to get into the hospital and provider supply chain. What’s more, the company already obtained licenses to distribute medical supplies to providers in 43 states.
2. Mail order and retail pharmacy. Amazon has secured approval as a wholesale distributor from 12 state pharmaceutical boards, meaning it could also build pharmacies into its recently-acquired Whole Foods stores. The L.E.K. authors suggested that Amazon could also employ its predictive analytics and customer data capabilities to build digital health tools that track and influence patient behavior.
3. Pharmacy benefit manager. Pharmacy benefit managers, or PBMs, drive prices down by taking advantage of the combined purchasing power of health plan enrollees. That's something Amazon knows how to do. It could partner with a large PBM such as Express Scripts or buy a smaller player, L.E.K. said.
4. Telemedicine or in-home healthcare. Amazon's Echo and Alexa also give the company an enormous platform for new voice-activated services, and healthcare organizations are already starting to conduct proofs-of-concept with them. L.E.K. said Alexa's first step would be to help book physician visits and, using Echo Show's video capabilities, virtual house calls would make for a smart second move.
5. AI-powered diagnostics and continuous care. This could be fully automated, AI-driven, in-home healthcare and diagnostics, said Johnson, who noted that Amazon has deep AI capabilities – machine-learning already drives many of its offerings, from its customer recommendation engine to its service centers. It would be logical to harness that capability to diagnostics. Johnson added that the company has already started with Alexa delivering first-aid information and voice driven self-care instructions. Adding tasks such as auto-refill and medication reminders would not be a stretch.
Amazon already has many of the core competencies needed to compete in healthcare, Haslehurst added, including ready access to capital, a massive distribution infrastructure, a strong technology base, a robust data analytics capability, and a deep, talented executive bench.
Moreover, Bezos himself, “is relentless, resourceful, fast, inventive and customer-obsessed,” L.E.K. said.