Amazon's next big thing? Prime, but for healthcare

Amazon has been making a series of moves into the healthcare space. Put them together and you have the outline of a plan for a radical shakeup of the industry.
Written by Jo Best, Contributor

Over the last couple of years, Amazon appears to have been laying the foundations for a more significant healthcare push. 

Amazon is hardly the first tech titan to turn its attention to the health space: Google has DeepMind and Verily; the Apple Watch can now offer you an ECG, while IBM is pushing Watson and numerous strands of healthcare industry software. Even Facebook has in the past dipped its toe in the market with a data-sharing project.

The reasons for Amazon's interest in the healthcare market are likely to be same ones that the sector appeals to its competitors.

"Amazon likes to target two kinds of industry: the first is where they see an opportunity to reform, where it's not the most user friendly of industries, where there's a lack of trust... The second is where they see a lot of uneven profit margins being distributed, where a few companies are making a lot of money, they have high profit margins and customers are unhappy." In the case of healthcare, intermediaries like pharmacy benefit managers, drug wholesalers, and distributors are "sucking a lot of money out of the system", says Anurag Gupta, a VP at tech analyst Gartner.

There are three reasons why healthcare is of interest to tech's big names, according to Gupta. The first is its size: the industry is huge, and demand for its services is growing. The second: it's an industry filled with waste and inefficiency (as anyone who's seen faxes and paper notes in doctors' offices can attest). The third is our changing perceptions and expectations as consumers: while retailers and other industries have become more responsive and customer focused, the health industry has consistently failed to keep pace.

In addition, the way healthcare is being delivered is changing, with patients treated less often in hospitals and more as outpatients, while payers are moving towards a system that reimburses providers for helping reduce the cost of care overall. 

"The long and short of it is we have a $3.5 trillion industry and the delivery environment is moving out of the hospital settings, which has high barriers to entry for external business, to the outpatient environment, which has low barriers to entry, so there's a glut of revenue newcomers can compete for," says Jeff Becker, senior analyst at tech analyst Forrester.

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Increasingly, Amazon looks to be positioning itself to become one of those newcomers. So what has Amazon, which already stretches from cloud computing to retail to Alexa digital assistant, done in healthcare so far? And how do all these pieces fit together?

Amazon has been moving forward on both hardware and software projects related to health. Late last year Amazon Web Services announced it was planning to extend its Comprehend natural language processing to medical records, a service that would allow healthcare providers to extract information from medical notes, and from the medical jargon they contain. AWS also already targets the sector and has a dedicated Healthcare and Life Sciences unit. 

And what about the hardware side? While Amazon has made its own devices with varying levels of success -- from the highs of its Fire tablet range to the lows of its now-defunct own-brand phone -- for now it seems happy to leave the dedicated health hardware side to third parties. A recent deal with Arcadia Group will see Amazon exclusively carry a range of consumer medical devices, including blood pressure monitors, for example.

But an even more significant sign of Amazon's healthcare intentions than these came earlier last year with an agreement between the company, Berkshire Hathaway, and JP Morgan Chase to form a joint venture

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The aim is to create technology to provide the three companies' US employees and their families with "simplified, high-quality and transparent healthcare at a reasonable cost", and to do so "free from profit-making incentives and constraints". It's modelling an employee benefits company, from provision through to payment. Between the three companies, there are over one million employees, a figure that puts it in the same league as the top-tier insurers. In June, the CEO of the still-unnamed company was announced: Dr Atul Gawande, a surgeon and writer best known for books, including Being Mortal, that call for change to current healthcare models.

In mid-2018, Amazon made another health acquisition when it bought PillPack, a company that delivers medications by post to people who take several drugs in a day, and refills their prescription when needed -- think of an Amazon Prime service for meds. It's already applied for licences to ship drugs to new states, including Washington. With the state housing Amazon's HQ, it's possible that that PillPack will be rolled out to Amazon's own employees first under the new JV, allowing Amazon to build up vital pharmacy expertise and perfect the model before rolling it out further.

Putting all these different elements together suggests a serious effort by Amazon to rethink how healthcare is delivered.

"They're building an employer health benefits platform, they're partnering with JP Morgan and Berkshire to tackle employee health costs. That is what they said they're doing, but the team they've hired is just too talented and too ambitious for that to really be the extent of what they're trying to build. The thought here is they're trying to basically build Prime for healthcare, a consumer-facing subscription model for healthcare goods and services and to meaningfully compete with your local brick-and-mortar healthcare vendors by being a one stop shop for everything from telehealth to IoT networks, chronic disease management to medical devices to your actual drug supplier, and everything in between," Forrester's Becker says.

Becker is not the only one who believes a health version of Amazon Prime is on the way. John Doerr, an early investor in Amazon and reportedly a friend of Amazon CEO Jeff Bezos, told a conference in November: "Imagine what it's going to be like when he rolls out Prime Health, which I'm convinced he will."

Any expansion of Prime into healthcare territory could have a significant impact on those already in the sector. "If Amazon can bring more competitive drug pricing through Prime Health, it will likely be well adopted by patients and providers alike, while pharma would need to change strategy to adapt and compete in a more transparent marketplace," says Edit Kovalcsik, healthcare analyst at GlobalData.

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While Prime Health might not shake up the healthcare industry as fast as Amazon Prime did with retail, it will likely change access to medicine and pricing of drugs, which are major concerns of healthcare providers and barriers to optimal patient care. "The increasing transparency is likely to bring about more price competition, lowering costs and forcing Pharma to change their business model. Furthermore, accumulation of real-world data on drug safety/efficacy provided by Prime members could bring about a more exposed competition between Pharma companies, changing the pharmaceutical value chain," Kovalcsik says.

According to GlobalData's research, a majority of Americans it surveyed approve of Amazon's decision to enter the pharmacy market, and a significant margin would like Amazon to lower prices, to be able to pick up prescriptions from Whole Foods stores, and have same-day delivery. Around half would like a discount with their Prime membership. Just under 60 percent of consumers would like to be able to reorder drugs via Alexa, and 48 percent would like a discount for Prime members.

The company may have another key component of a healthcare business in place already: its digital home assistant. Alexa-powered devices, like the Echo and Dot, already have some health-related skills, including delivering breast-feeding advice and helping with first aid. Amazon is rumoured to be putting together a health-focused unit within its Alexa unit, expanding its uses in fields such as diabetes management -- including through a pharma-sponsored competition, the Alexa Diabetes Challenge. Gartner's Gupta suggests that Alexa could even be combined with Comprehend so that during doctors' appointments, Amazon systems could extract medical information from the conversation and upload it to an electronic patient record, putting an end to the practice of physicians not making eye contact with their patients in favour of frantically typing.

Also: How deep learning helps match the right patient with the right healthcare TechRepublic 

One small hitch, however: Alexa isn't HIPAA compliant. Until Amazon gets that compliance, its health uses are limited, as it can't be used to process identifiable health data. Once Alexa has achieved HIPAA compliance, however, it's easy to see how tech and health companies could run with Alexa's abilities, from monitoring chronic conditions to allowing nursing home residents to more easily control their environments.

Amazon's non-tech businesses also offer ways for the company to expand into the healthcare industry. Its Whole Food acquisition, for example, could allow it to tie up with insurers offering discounts to users who share their shopping data and eat healthily; equally, data from its Amazon purchases could be used to identify food deserts or people with poor diets, which it could then remediate with low-cost nutritious food deliveries.

While Amazon may be a relative latecomer to the healthcare market, it's already poised to shake things up, according to Forrester's Becker: "From a technology standpoint, I think that Amazon's ambitions are bigger than the likes of Apple and the even likes of Google, which has been making some recent news with its healthcare ambitions, but it's not as organised or as mature as what Amazon is putting together at this point."


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