Maria Shepherd, President and Founder, Medi-Vantage10.03.22
Google, Amazon, and Apple—they all want a bite of the U.S. healthcare pie and, thus far, it hasn't really worked (beyond the fitness space). So, when Amazon announced its intention to acquire One Medical, I thought, “here they come again.” This news was significant within the medtech community and even at the national level, but was anyone really surprised? Did anyone think Silicon Valley was going to walk away and leave $4.1 trillion per year (19.7% of the nation’s gross domestic product)1 on the table just because the first few tries didn’t work?
Enjoyable and calming—these aren't words I have used to describe the U.S. healthcare system. One Medical claims, “We make people fall in love with their doctor’s office.” Fall in love? These are bold words from a medical provider.
But what does this acquisition have to do with medical devices? One Medical wants to disrupt the primary care market (Table 1) through its digital services platform. For an annual fee, the company provides its approximately 800,000 members on-demand digital and virtual health services 24/7, promising rapid response times; scheduled virtual visits; and consistent, quality care with up-to-date digital health records. For those who can’t visit the primary care physician’s (PCP) office, One Medical guarantees frictionless access to face-to-face care over video. By signing up, 8,000 employers believe in the One Medical value proposition,2 but individual members can also apply.
Now, back to medical devices; the Medi-Vantage take is this is a long game for Amazon, and while its initial target is the PCP market One Medical allows them to penetrate, the ultimate goal is to reach into the $3.74 trillion that remains and grab as much as possible. Amazon understands the primary care physician market is the gatekeeper to the hospital, surgical procedures, cardiovascular procedures, etc. In other words, even though the PCP controls only 6.5% of the U.S. healthcare market, it is the gateway to the entire $4.1 trillion. This is a bold and beautiful strategy and, as a favor to Amazon, we’ve consolidated our healthcare systems so they are no longer fragmented and difficult to manage.
In a Health Affairs article, using national data, it was found the segment of PCPs affiliated with vertically integrated health systems grew from 38% to 49% from 2016 to 2018 (Table 2). In 2018, more than 50% of all physicians and 72% of hospitals were affiliated with one of the 637 health systems in the Compendium of U.S. Health Systems from the Agency for Healthcare Research and Quality.6
Amazon Pharmacy followed Haven, as did Amazon Care—a virtual health benefit for Amazon employees. Amazon has made several strategic moves into the healthcare sector with the apparent goal of rapid growth of its vertically united healthcare businesses. It isn’t easy, but they’re going to keep trying because they can afford to (Table 3).
Amazon has broadened its reach to include telehealth, in-person primary care, diagnostics, pharmacy, wearables, and even grocery. Rest assured, Amazon will attempt to integrate medical data with apps suggesting recommendations for health activities and products (Amazon supplied?), decreasing the time and drain of in-person physician visits, and delivering drugs through online pharmacy PillPack.
For those wondering if Amazon has a smartwatch yet, it does—the Halo View—but it’s no Apple Watch (not yet). Alexa-powered smartwatches do exist—in Fitbit’s Versa 2 (launched in 2019 before Fitbit struck a deal to be acquired by Google).8 As for groceries, Amazon offers Amazon Prime at Whole Foods Market, with multiple incentives to shop online or in store, as well as delivery and pickup options to meet the grocery buyer’s needs.
While this may sound like a commercial advertisement for Amazon, it’s not. The point is Amazon is trying to create an end-to-end healthcare customer experience so we turn to the company for all of our healthcare needs, from doctors to healthy and fresh food. With the acquisition of One Medical, Amazon gains 188 primary care medical offices in 25 markets in the U.S., and also its employer clients.
References
Maria Shepherd has more than 20 years of leadership experience in medical device/life-science marketing in small startups and top-tier companies. Medi-Vantage provides marketing and business strategy and innovation research for the medical device industry. Shepherd can be reached at mshepherd@medi-vantage.com. Visit her website at www.medi-vantage.com.
Why This Is Important
The Amazon deal is big. In July, the company declared a definitive merger agreement to acquire One Medical. So, who and what exactly is One Medical? According to its website, “One Medical is a membership-based primary care practice on a mission to make getting quality care more affordable, accessible, and enjoyable for all through a blend of human-centered design, technology, and an exceptional team. Our members enjoy seamless access to comprehensive care at calming offices near where they work, live, and shop in 12 major U.S. markets, as well as 24/7 access to virtual care.”2Enjoyable and calming—these aren't words I have used to describe the U.S. healthcare system. One Medical claims, “We make people fall in love with their doctor’s office.” Fall in love? These are bold words from a medical provider.
But what does this acquisition have to do with medical devices? One Medical wants to disrupt the primary care market (Table 1) through its digital services platform. For an annual fee, the company provides its approximately 800,000 members on-demand digital and virtual health services 24/7, promising rapid response times; scheduled virtual visits; and consistent, quality care with up-to-date digital health records. For those who can’t visit the primary care physician’s (PCP) office, One Medical guarantees frictionless access to face-to-face care over video. By signing up, 8,000 employers believe in the One Medical value proposition,2 but individual members can also apply.
The Amazon Strategy
Only time will tell if Amazon is successful at cracking the healthcare nut with the One Medical acquisition, but they have been at it since Amazon’s first foray into the healthcare industry in 2018 when it acquired the online pharmacy startup PillPack for $753 million.4 The PillPack acquisition was followed by the formation of Haven—a joint partnership with Berkshire Hathaway and JP Morgan Chase, led by the renowned Atul Gawande, M.D., but it disbanded in 2021. According to Harvard Business Review, the main reason Haven failed was the consolidation of health systems that occurred in the U.S. over the last 10 to 15 years.5Now, back to medical devices; the Medi-Vantage take is this is a long game for Amazon, and while its initial target is the PCP market One Medical allows them to penetrate, the ultimate goal is to reach into the $3.74 trillion that remains and grab as much as possible. Amazon understands the primary care physician market is the gatekeeper to the hospital, surgical procedures, cardiovascular procedures, etc. In other words, even though the PCP controls only 6.5% of the U.S. healthcare market, it is the gateway to the entire $4.1 trillion. This is a bold and beautiful strategy and, as a favor to Amazon, we’ve consolidated our healthcare systems so they are no longer fragmented and difficult to manage.
In a Health Affairs article, using national data, it was found the segment of PCPs affiliated with vertically integrated health systems grew from 38% to 49% from 2016 to 2018 (Table 2). In 2018, more than 50% of all physicians and 72% of hospitals were affiliated with one of the 637 health systems in the Compendium of U.S. Health Systems from the Agency for Healthcare Research and Quality.6
Amazon Pharmacy followed Haven, as did Amazon Care—a virtual health benefit for Amazon employees. Amazon has made several strategic moves into the healthcare sector with the apparent goal of rapid growth of its vertically united healthcare businesses. It isn’t easy, but they’re going to keep trying because they can afford to (Table 3).
Amazon has broadened its reach to include telehealth, in-person primary care, diagnostics, pharmacy, wearables, and even grocery. Rest assured, Amazon will attempt to integrate medical data with apps suggesting recommendations for health activities and products (Amazon supplied?), decreasing the time and drain of in-person physician visits, and delivering drugs through online pharmacy PillPack.
For those wondering if Amazon has a smartwatch yet, it does—the Halo View—but it’s no Apple Watch (not yet). Alexa-powered smartwatches do exist—in Fitbit’s Versa 2 (launched in 2019 before Fitbit struck a deal to be acquired by Google).8 As for groceries, Amazon offers Amazon Prime at Whole Foods Market, with multiple incentives to shop online or in store, as well as delivery and pickup options to meet the grocery buyer’s needs.
While this may sound like a commercial advertisement for Amazon, it’s not. The point is Amazon is trying to create an end-to-end healthcare customer experience so we turn to the company for all of our healthcare needs, from doctors to healthy and fresh food. With the acquisition of One Medical, Amazon gains 188 primary care medical offices in 25 markets in the U.S., and also its employer clients.
The Medi-Vantage Perspective
What does this have to do with medical devices? Strategy! Amazon clearly sees what many of us have forgotten in our focus on interventionalists and surgeons. Primary care physicians are the gatekeepers of patients and their referrals for other medical procedures. Control the primary care physician and you control what happens in the remaining part of the healthcare business. The primary care physician segment may only be approximately $266 billion today, but it controls the flow of the patient population that needs stents, GI endoscopy, and spine surgery. A little planning now will go a long way in protecting our orthopedic device margins 10 to 20 years from now.References
- go.cms.gov/3eghEPK
- bit.ly/mpo221002
- bit.ly/mpo221003
- cnb.cx/3B7wOjA
- bit.ly/mpo221005
- bit.ly/mpo221006
- bit.ly/mpo221007
- bit.ly/mpo221008
Maria Shepherd has more than 20 years of leadership experience in medical device/life-science marketing in small startups and top-tier companies. Medi-Vantage provides marketing and business strategy and innovation research for the medical device industry. Shepherd can be reached at mshepherd@medi-vantage.com. Visit her website at www.medi-vantage.com.