Amazon continues to stay mum on its healthcare ambitions but if you put the pieces together, it’s clear there’s some sort of play in the works.
This past year, rumors swirled around the clandestine 1492 lab, focused, among other things, on electronic medical records and telemedicine. Then there was the string of filings with state pharmaceutical regulators, the exploratory talks with generic drug giants Mylan and Sandoz, a unit of Novartis, and, in mid-January, the hiring of one of Seattle’s top doctors, Dr. Martin Levine, who ran Iora Health’s Seattle-based clinics.
Several analysts even pointed to Amazon as a clear catalyst for pharmacy chain parent CVS Health’s $69 billion acquisition of Aetna, one of the U.S.’s largest health insurance companies.
“CVS would never admit it, but this sort of pivot is Amazon’s doing,” Trip Miller, managing partner at Gullane Capital Partners, a minor shareholder in Amazon, told The Street. “What they’re doing now is definitely based on Amazon’s interest.”
But so far, that’s all it is: rumors and speculation. Amazon continues to decline comments. So what on earth is going on?
Forget medicine, think healthcare
One clue analysts have leaned on is the state filings. According to reports, Amazon was approved for wholesale pharmacy licenses in 12 states including New Jersey, Connecticut, Michigan and Arizona, but the fact that Amazon canceled its Maine license was purported to be an indicator of what the e-commerce giant might have in mind.
“In Maine, a medical device license was not needed for the sale of medical supplies so industry sources have implied the Maine license was a strong leading indicator of whether or not Amazon would enter the drug supply chain,” wrote RBC Capital Markets in a research note. “We see this cancellation as a negative indicator of the likelihood that Amazon enters pharmacy in the near term and thus as a positive for the pharmacies and drug supply chain.”
In mid-January, Amazon posted a listing for an expert in a set of health privacy regulations known as HIPAA – the Health Insurance Portability and Accountability Act, which focuses on privacy compliance.
Investment bank Cowen took this as a sign the company may not be interested in pharmaceuticals after all, but rather the patient side of things, and the role Alexa, its much-touted voice assistant, could play in the sphere.
“We think a natural fit for Amazon could be incorporating its Alexa voice assistant for some healthcare needs,” wrote the Cowen researchers, pointing to practical things like using Alexa to book a telemedicine appointment. “We note, Teladoc is currently compatible with Alexa, and will allow you to schedule a televisit with Teladoc. The privacy of patient records are highly regulated, and Amazon may be seeking a professional that will help the company better understand its responsibility of patient information for data analytics.”
Build or buy?
Although there is plenty of evidence Amazon is building a healthcare-focused team, buying is also a potential strategy. Last year, Amazon stood alongside drugmakers in a $900 million investment round for Grail, a startup creating a blood test to screen for cancer.
M&A analysts have pointed to Target, Rite Aid Corp, and pharmacy benefit manager Express Script Holding Co. as possible healthcare acquisitions for the tech company.
“Due to Target’s relationship with CVS Health Corp, this would allow Amazon to accelerate their entry into pharmacy and healthcare,” Brittain Ladd, a supply chain consultant who worked on the global expansion for AmazonFresh told The Street.
Amidst continued debate over the future of the Affordable Care Act (ACA) and tax reform, outsiders like Amazon continue to press into the healthcare sphere. There’s no question technology is revolutionizing the healthcare industry, but the role of technology companies – disrupters who formally played no part in the sphere – is yet to be seen.
But as Johnson & Johnson’s CEO Alex Gorsky recently told CNBC at the JP Morgan healthcare conference, it’s time for healthcare firms to prepare for disruption.
“What I would encourage almost anybody, whether it be in pharma, medical device, OTC (over-the-counter), we should all be acting like Amazon is getting into our business,” said Gorsky. “Frankly we have got to create a crisis, we have to make sure we are always competitive, we are always thinking about how we can be more effective, how can we be more efficient.”
