Happy Thursday, Today we're diving a bit deeper into Amazon's healthcare strategy given recent AWS announcements by the ecommerce giant in healthcare. I hope you enjoy the visuals, and if so - would love for you to pass along the newsletter to a colleague. These take me a while to put together and I invest a number of hours and energy to make sure Hospitalogy is as valuable and high quality as possible for subscribers! As always, I appreciate each and every one of you. |
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BIG TECH IN HEALTHCARE AHH |
Key Takeaways: Amazon's Emerging Healthcare Strategy |
- Amazon's AWS for Health is developing picks and shovels for builders in healthcare to bolster its enterprise cloud offering (HealthScribe, HealthImaging)
- On the care delivery side, Amazon is building a consumer-centric healthcare platform between Amazon Clinic, RxPass, Pharmacy, and One Medical
- Platforms take a long time to build, but if anyone can do it, it's Amazon
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Amazon's Healthcare Strategy is Taking Shape Amazon's activity and movement toward critical mass in healthcare is picking up steam. The retail ecommerce giant has made a number of plays across AWS and cloud, but also interestingly, in care delivery (both virtual and in-person) and pharmacy. |
If they're not already, Amazon is headed toward being a consumer-focused healthcare platform, making long-term investments and product launches into the space (Clinic, PillPack → Pharmacy, One Medical). On the other side of the coin, AWS for Health, Amazon's enterprise cloud play, has been increasingly focused on providing the picks, shovels, and lego bricks for healthcare software developers to build new tools as of late which I wrote about on Tuesday (HealthScribe, HealthImaging) with the ultimate goal of creating a more compelling offering for its enterprise cloud healthcare customers. Take a look at Amazon's current healthcare footprint as of August 2023 and you can see the strategy slowly taking form: | The healthcare strategy is taking shape in a number of interesting platform plays: Amazon Clinic: Amazon Clinic acts as a supply and demand platform for low-acuity virtual care and rather than directly providing care themselves, Clinic aggregates existing supply of virtual care providers (Wheel, SteadyMD, Curai, HelloAlpha) Pharmacy ↔ Care Delivery Flywheel: Similarly to CVS-Caremark-Aetna-Oak Street or Walgreens-pharmacy-co-located VillageMD, patients are more likely to fill their prescriptions on-site, or in this case, on-platform with Amazon. The effect is probably compounded online given that Amazon's RxPass is $5 and circumvents insurance (side by side with Clinic). Amazon's Platform Advantage in Healthcare What affords Amazon the ability to create these platforms in healthcare over time? First of all, they're already giant, so stomaching losses on platform developing are a blip on the radar. Secondly, and more importantly, Amazon Prime is an incredibly sticky user base and allows Amazon to acquire customers for a long-term healthcare platform vision on the cheap. At the end of the day, it all boils down to CAC, and Prime is the CACiest of them all with 150 million active prime users in the US. |
Source: Healthcare Platform Blog - Amazon is Uniquely Positioned to Deploy Platform Envelopment Strategies in Healthcare: 7 Leverage Points (Part I) (Part 2) The Healthcare Platform Blog had a great 2-part series (linked above & below) on Amazon where they outlined the following competitive advantages and Amazon's distinct ability to build platform businesses in healthcare: - A Huge User Base
- A Loyal User Base
- Provision of Hybrid Clinical Care
- Deep Pockets
- A National and International Footprint
- One-Stop-Shopping for Employers
- Digital Front Door for Healthcare
To this end, Amazon can offer consumer-centric healthcare services to Prime members at scale and continues to push the healthcare needle forward from a consumerism standpoint, offering, for instance, a 28% discount on yearly One Medical memberships $144 / year during Amazon Prime Day, wait times along with telehealth messaging services thru Clinic, and of course the aforementioned RxPass for $5 / month no matter how many eligible generics you need filled.
My biggest question, and one that remains unanswered, is why Amazon bought One Medical - a brick and mortar player - at all when it can act as this great aggregator of virtual care delivery. I was skeptical of the acquisition (and purchase price) back in July 2022, and I'm still wondering what Amazon is planning to do with clinic expansion + Iora today. Is the pharmacy and Prime → One Medical flywheel enough? My working thesis is no…and that more is coming over the next several years. Amazon's Future in Healthcare Amazon is building its version of consumer-centric healthcare. Will consumers continue to come? How will we look back upon the platforms and shovels being built today in 10 years? Things are picking up speed, and yet…healthcare is notoriously slow. Platform thinking and ROI is long-term, and healthcare is default long-term. Eventually these platforms and flywheels will emerge, but we have a long time to go. But if anyone can succeed, it's Amazon. If you have any further thoughts about Amazon's place in healthcare, or anything I might have missed in the discussion, please do feel free to reach out! Resources & Further Reading Material: - Amazon is Uniquely Positioned to Deploy Platform Envelopment Strategies in Healthcare: 7 Leverage Points (Part I) (Part 2)
- The New Rules of Healthcare Platforms (Link)
- Summit Health Advisor's State of Healthcare Platforms report (Link)
- Amazon and One Medical: Are we There, Yet? (Link)
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- Messi coming to FC Dallas this Sunday! Fun fact: I played soccer in high school and I was also...the kicker and punter on the football team.
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Thanks for the read! Let me know what you thought by replying back to this email. — Blake |
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