How Amazon’s continued expansion into healthcare could buoy the sector

Following Amazon’s $3.9 billion acquisition of One Medical, Business Insider reported the company would add mental health services to its portfolio. Although there are skeptics who fear Amazon’s privacy track record in the context of healthcare, some say the company’s moves could be positive for the industry.

The tech behemoth originally entered the health sector after it acquired PillPack, an online pharmacy, in 2018 and later rebranded as Amazon Pharmacy. The company also provides Amazon Care as a way for individuals in certain states to get treatment.

Although those endeavors seem to be bearing fruit, Amazon also had a failed venture, Haven, with Berkshire and JPM that disbanded after multiple internal issues.

Despite the ups and downs, Amazon said in a press release detailing the One Medical acquisition that it plans to improve the quality of care across the board:

We think health care is high on the list of experiences that need reinvention. Booking an appointment, waiting weeks or even months to be seen, taking time off work, driving to a clinic, finding a parking spot, waiting in the waiting room then the exam room for what is too often a rushed few minutes with a doctor, then making another trip to a pharmacy — we see lots of opportunity to both improve the quality of the experience and give people back valuable time in their days.

Now that Amazon has its own means of medicinal distribution, the acquisition, in a way, could push demand, since the company can now give access to providers across various markets.

For Deena Shakir, a partner at Lux Capital, the move by Amazon shows the value of healthcare for leading tech companies.

“This deal underscores the value that Big Tech is placing on healthcare and the importance of omnichannel/hybrid (brick-and-mortar in addition to virtual) as well as tech-enabled services,” Shakir told TechCrunch over email. “It’s a better multiple/comp than we are seeing in the public markets right now and shows that there are valuable exit opportunities for companies even in a downturn or icy IPO market.”

But for Adrian Aoun, founder of Forward Health, he said he wished Amazon did more.

“You’re taking literally the world’s most impressive tech company and you’re just aiming low,” he said.

One Medical, based in San Francisco, provides care in nine markets and serves close to 400,000 people, but for Aoun, that’s not enough for Amazon. He explained to TechCrunch that Amazon needed to align themselves with being proactive instead of reactive in healthcare.

“What Amazon just did, is they just aligned with the entirely wrong incentive,” Aoun said. “They just literally said, ‘we’re gonna focus on keeping you at work, not keeping alive.’”

Even though there is a push from the tech giant to expand its own services, Aoun added the company needed to be resourceful.

“Amazon just frankly made what I would argue is one of the classic mistakes in innovation,” Aoun said. “They’re trying to rebuild the old world. They’re not trying to innovate and build the new world [ … ] If you’re not really going to innovate then I don’t know that this is going to do that much.”

Although Amazon’s acquisition of One Medical is confirmed to be in progress, the launch of their on-demand therapy has yet to be launched. According to Insider, who originally reported the launch, the product would be given through Amazon Care and was a way for the company to strengthen its healthcare business.

Shakir and Aoun both agree that Amazon’s expansion is providing new pressure for startups and investors to enter the space with stronger offerings.

“At the end of the day, healthcare is undoubtedly a massive market opportunity, and the pandemic has shed light on its many inefficiencies and its reliance on technology,” Shakir said. “With Amazon now in the market, a delightful consumer experience will be a critical must-have, not just a nice to have. While Big Tech will always play an important role in the healthcare ecosystem, breakthrough innovation is more likely to originate from early-stage entrepreneurs who could partner with Big Tech to scale.”

Aoun explained there won’t be a need to keep up with Amazon but rather find ways to be creative within the space.

“This actually opens up more opportunity for other players, because now that Amazon’s gonna be distracted, frankly, by a strategy that won’t go very far. Now, you’ve got a whole bunch of opportunities for everybody else to start to get in the game,” he said.

As Amazon begins to implement its healthcare services in a larger capacity, some have brought up questions about patients’ privacy data in light of recent events.

Talkspace and BetterHelp have been in the spotlight as the U.S. Senate earlier this year asked these mental health app providers to give clarification on their data collection and sharing policies after reports alluded that the companies could be sharing data with Meta and Google.

Shakir said Amazon has to understand the space and accept the fact Big Tech companies have a “complicated relationship with healthcare.”

“One of the challenges of building a product for healthcare is that it requires not only nuance — understanding clinical workflows and consumer habits — but also must be built within specific constraints such as HIPAA, billing codes, EMR interoperability, etc.,” she said. “This can be particularly challenging when innovating within a large company that also has its own stakeholders and competing priorities.”

Other tech giants such as Apple and Google have also ventured into healthcare.

Although Apple hasn’t acquired a company they have partnered with various healthcare providers to provide healthcare professionals with patient biometric data collected via an Apple Watch. To name a few features, a patient can monitor their heart rate, download apps to help with neonatal care and manage medication intake.

Google on the other hand has been more focused on the research side of healthcare. Through partnerships at various universities, they have been able to expand research in digital well-being, provide information on suicide and expand Fitbit features.

Bigger players focusing on healthcare could steamroll new entrants, but it could also push startups to explore aspects of the space that haven’t garnered much attention in past, but that could drive significant improvements for patients and payers alike.