5 Ways Amazon Could Dominate Healthcare

Analysts say Amazon already has the core competencies to compete in healthcare: ready access to capital, a massive distribution infrastructure, a strong technology base, robust data analytics, and a deep executive bench.

The speculation is rife about how, when and where Amazon will plunge into the healthcare sector.

In a new report that describes five scenarios through which Amazon could enter and dominate the industry, Rob Haslehurst, a managing director at Boston-based L.E.K. Consulting, warns against pigeonholing the e-commerce giant.

"Anyone who thinks of Amazon as just a very big digital retailer needs to think again," Haslehurst said. "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 ecommerce offerings."

"They have repeatedly shown that they have the capabilities, the patience, and the deep pockets to disrupt industry after industry," Haslehurst said. "Healthcare is no exception."

Amazon’s five possible entry points are:

Durable medical equipment and medical supplies. Amazon's core competencies in logistics and distribution, and its existing B2B ecommerce platform, will allow it to easily expand into hospital and provider supply, disrupting the traditional group purchasing organization contract model. Amazon has already obtained licenses to distribute medical supplies to providers in 43 states.
Mail order and retail pharmacy. Amazon has secured approval as a wholesale distributor from 12 state pharmaceutical boards. Drug storage is a hurdle, and there are regulatory challenges. But Amazon can build pharmacies into its recently-acquired Whole Foods stores. The company can also take advantage of its predictive analytics and customer data capabilities to build digital health tools that track and influence patient behavior — giving it a leg up over traditional pharmacy in working with the most challenging areas of healthcare delivery.
Pharmacy benefit manager. Amazon's most likely move into the field will be by partnering with a large PBM such as Express Scripts or by buying a smaller player like Prime Therapeutics. Amazon would gain a pharmacy network and a claims adjudication capability, and its partner would gain access to millions of Amazon Prime members.

Telemedicine or in-home healthcare. Amazon's Echo smart speaker (with 20 million units sold to date) and Alexa, its voice-controlled personal assistant service, give it an enormous platform for new voice-activated services. Healthcare could easily be among them. Alexa's first step would be to help book physician visits. But thanks to Echo Show's video capabilities, the next move might be in-home virtual house calls.
AI-powered diagnostics and continuous care. Amazon has deep AI capabilities — machine-learning already drives many of its offerings, from its customer recommendation engine to its service centers. The next step would be to harness that capability for first-line diagnostics, and services such as auto-refills for prescriptions, and medication reminders.

L.E.K. Managing Director and report co-author Joseph Johnson said these five potential inroads strategies "are not mutually exclusive."

"In fact, they represent a roadmap that Amazon can follow to move continually deeper into the healthcare industry," Johnson said. "All of them illustrate Amazon's ability to drive down prices and margins while fundamentally transforming customer behavior."