Amazon is going deeper into the prescription drug business. Here are the 7 ways the tech giant is taking on healthcare, and why two analysts think doctors visits are next.

  • Amazon is pushing deeper into the pharmacy business, selling prescription medications and offering discount services for Prime members. 
  • It's one of a number of ways Amazon is going after the massive healthcare industry.
  • With digital-health services becoming more popular, analysts think Amazon is well-positioned to use its internet clout and massive size to send its health business into the stratosphere.
  • There are seven key efforts at Amazon that are going after the industry, from pharmacy to telehealth.
  • Do you have information about Amazon's health business? Reach out to this reporter at [email protected] or through Signal/text at 1-252-241-3117.
  • For more stories like this, sign up here for Business Insider's daily healthcare newsletter.

Over the years, Amazon has grown into a massive $1.63 trillion company by disrupting the traditional way people shop.

Now its eyes are set on healthcare, an industry ripe for disruption.

On Tuesday, the company announced a new "Amazon Pharmacy" service, which it will use to sell prescription and generic drugs on Prime members are subject to big discounts, plus two-day delivery. 

"The company is disrupting the pharmacy supply chain through PillPack, has launched an employee-only virtual care offering, and has millions of households with Alexa — a potential voice-first 'digital front door,'" Marc Albanese, a CB Insights research director, told Business Insider in an email. "All of this is on top of Amazon's AWS healthcare offering."

Indeed, Amazon's health efforts are more diverse than other tech giants', even as they stand up health-focused products and businesses too. Microsoft and Google are running a suite of healthcare solutions on the cloud, with individual projects designed around diagnostics and telehealth. Apple's devices are getting more sophisticated as it builds out the personal-health-record service on the iPhone.

Except for personal health records, Amazon is basically going after all of the above, plus the physical delivery of drugs and care through Amazon Pharmacy, Amazon Care, company clinics, and the increasingly health-savvy Alexa devices.

Amazon hasn't said much about what's driving its ambitions beyond wanting to make people healthier. But there's nearly $8 trillion in global healthcare spend, compared with just $2.4 trillion in online retail, which is "ample opportunity to warrant Amazon's healthcare efforts," Forrester analysts wrote in a January 2020 report.

Some people think big tech companies can make healthcare cheaper. That's a philosophy that's certainly guiding some of Amazon's efforts. The company employs more than 1 million people, and as a self-insured employer, it's responsible for the cost of its medical bills. Industry insiders see the giant, especially with digital health blowing up, using its internet prowess and size to sell cost-saving solutions to other companies.

"Taken together, Amazon has the potential to connect providers, remote monitoring (through Alexa or its recently launched Halo wearable), pharmacy, and potentially benefits into a full-stack virtual care offering," Albanese said.

Its quest for healthcare business hasn't been easy. The Information reported that Haven, Amazon's health venture with JPMorgan Chase and Berkshire Hathaway, has stalled. And CVS Health, an industry incumbent, has sued Amazon over allegations that it's encroaching on its turf, with some success.

Here's the seven biggest health ventures at Amazon, from telehealth to wearables.

Do you have information about Amazon's health business? Reach out to this reporter at [email protected] or through Signal/text at 1-252-241-3117.

This article was initially published in November and has been updated after Amazon's announcement of its Amazon Pharmacy service. 

Through PillPack, Amazon gained a national pharmacy supply chain that it's now expanded into Amazon Pharmacy.

In June 2018, Amazon bought the online pharmacy PillPack in a deal that sent healthcare stocks tumbling and got industry insiders laser-focused on the tech giant's health plans. 

PillPack sends prescriptions to people who take multiple drugs. Through the purchase, Amazon gained an established pharmacy supply and licenses in 50 states, CB Insights said in a 2018 report, plus a $1.2 billion business in terms of projected annual revenue, CNBC's Christina Farr reported in 2019.

More than two years later, on November 17, the company announced an expanded pharmacy offering called Amazon Pharmacy, where customers can essentially shop for medications either with Prime discounts or their insurance.

Amazon will have tools that help them determine which is cheapest — Prime members can get discounts of up to 80% on generics and 40% on prescriptions at more than 50,000 US pharmacies — and said that doctors can now send prescriptions straight to Amazon.

Much like the news of the PillPack acquisition, when the tech giant announced Amazon Pharmacy, shares of pharmacy companies fell. That included CVS Health, Walgreens, and Rite Aid, as well as GoodRx, a company that helps people evaluate the cost of medications, saw sharp dips in their stock prices. Amazon's stock rose 1% shortly after the market opened on November 17.

Part of the promise of Amazon's entry into the drug supply chain — and why it scares the industry gatekeepers — is to create savings for customers at the expense of middlemen who make a profit from designing benefit plans, Forrester said in the January 2020 report provided to Business Insider.

But Amazon's pharmacy worked with the Evernorth, Cigna's health services division that includes Express Scripts, a pharmacy benefits manager, to negotiate the Prime discounts. In a note to investors on November 17, the investment bank Cantor Fitzgerald said the deal would likely benefit Cigna as well as GoodRx, which also works with the Evernorth discount program that Amazon is using.

The move puts the tech giant in direct competition with retail pharmacies, which sell drugs at the pharmacy counter and in the wake of the pandemic have been building up their own delivery services.

If PillPack's experience in 2019 is any indication, there could be lawsuits or unwillingness on the part of groups like CVS and Walgreens to transfer patients' prescriptions to the tech and retail giant.

Amazon Care does virtual and in-person medical visits for employees, and insiders expect it will eventually expand beyond the company workforce.

Launched in September 2019, Amazon Care is widely expected to become a commercial healthcare business, according to Business Insider's reporting. Amazon, however, has repeatedly emphasized that the care pilot is still in its early days and intended for employees. 

Amazon's workforce in Seattle can use the service for in-person and online medical visits, as well as drug delivery. In September, the company extended the virtual components of the pilot to eligible employees across Washington, it told Stat and Business Insider.

Erik Cardenas, one of two tech leaders at the organization, said he was focused on making imaging centers, labs, and docs in the network more coordinated, a concept called "interoperability" that saves patients from tracking down their own health information.  

If it were ever made available to other businesses and consumers, Amazon Care would be one of the most disruptive healthcare ventures from the company, Jeff Becker, a senior healthcare analyst at Forrester, said. 

Like many huge employers around the US, Amazon is looking for ways to save money on healthcare, since it pays workers' medical bills. If the Care group can demonstrate savings for the larger company, it may very well work with other massive companies looking to do the same, providing care or contracting it out, while taking a tech fee, Becker said.

The target customer would look like an AT&T, Boeing, or Walmart that sometimes contracts directly with providers like Geisinger Health in Pennsylvania, bypassing health plans entirely to try to negotiate better deals.

"Right now if you're Walmart, you just call Geisinger and say, 'We would love to set up a direct contracting thing with you guys,'" Becker said. "That's not a clean market." 

He said Amazon Web Services, the largest cloud provider, got started in much the same way. In dealing with one of its own problems, server costs, Amazon built its own solution, the public cloud, which it now sells to other businesses, earning billions per quarter.

Read more: How a 38-year-old who taught himself health technology is shaping a key part of Amazon's plans to transform healthcare

Amazon Web Services has a huge presence in healthcare, helping drugmakers, providers, and health plans with a variety of data needs.

AWS has a huge presence in healthcare and touts clients like Cerner, one of the largest medical-records companies, and the Centers for Medicare and Medicaid Services. 

The cloud business essentially stores companies' data and websites, performs analytics with machine learning and other tools, and makes products like Comprehend Medical, a natural-language processor that can understand random text in doctors' notes and other reports.

For example, the company partnered with a Harvard hospital last year to test how artificial intelligence could simplify healthcare, Bloomberg's John Tozzi reported. It has a similar agreement with the University of Pittsburgh Medical Center, the University of Pittsburgh, and Carnegie Mellon University to study cancer diagnostics, with one goal being to develop individual risk scores for cancer patients using machine learning. 

It does more hands-on work with the pharmaceutical industry, too, helping to discover and develop new medications with Lyell Therapeutics, Novartis, Moderna, and other key drugmakers, Amazon said.

AWS has hired a handful of top healthcare people, including former Food and Drug Administration Chief Health Information Officer Dr. Taha Kass-Hout, to beat out Google and Microsoft in the quest for more health contracts.

While it doesn't break out revenue by industry, AWS made $11.6 billion in net sales in the third quarter of 2020, earning $3.54 billion after expenses. That was up more than 56% from the same period last year.

Amazon's Neighborhood Health Centers will provide primary care to more than 115,000 workers and their families in 5 US cities.

In July, Amazon announced another move into the business of healthcare delivery: clinics for employees set up near fulfillment centers in five cities across the US. They're staffed by Crossover Health, a company that contracts directly with employers to provide care.

The announcement came amid the company's coronavirus response, which stood up testing, subsidized emergency care, and paid time off for quarantines. More than 19,000 of Amazon's workers had gotten sick with COVID-19 as of October, and several have died. 

The clinics are a long-term strategy conceived more than a year ago to simultaneously cut costs and keep workers healthier. The company's hope is that if it makes preventive care more convenient, people won't have to make expensive visits to the emergency room, an Amazon press release said. 

The first clinic will be set up in North Texas, and the company expects to set up 20 health centers in Phoenix; Detroit; Louisville, Kentucky; and San Bernardino, California, as part of a pilot program servicing more than 115,000 workers and their families, the company said. If it's successful, Amazon said it might expand the service to more cities and states.

It offers late hours to accommodate work schedules; acute, chronic, and preventive primary care; prescription meds; vaccines; mental-health services; physical therapy; chiropractic care; health coaching; and help finding specialists, according to Amazon.

Many employers have adopted similar strategies. Walmart is launching more than 20 clinics around the country to offer primary care, lab testing, and more. Visits will cost $40 for adults without insurance, and just $4 for employees on certain Walmart health plans.

Halo is a health band for monitoring people's exercise, mood, and sleep.

In August, Amazon announced its first health wearable, Halo. With a monthly membership, the tech band can monitor fat percentage, sleep, exercise intensity, and even your tone of voice. It also offers exercises and mental-health routines through third-party sellers like Headspace and Mayo Clinic. 

The company hopes that customers can use the device to better keep track of their health beyond just steps and heart rate. It has incentives for being active and something like an alert system for when you're feeling down from a work meeting and taking it out on your spouse. 

But the company's ambitions for Halo don't stop with individual customers. It's already integrated into Cerner, the medical-records company, so that folks can share their health information with their doctors directly in their electronic files. 

That means we could see more Halos used for studies and patient monitoring.

Grand Challenge is a stealth group at Amazon tackling some of healthcare's biggest problems under the Google Glass founder.

Perhaps the most secretive health unit at Amazon that we know of, Grand Challenge, otherwise known as Amazon X and 1492, is working on cancer research, medical records, last-mile delivery of goods, and most recently a cure for the common cold, CNBC reported.

Led by Google Glass founder Babak Parviz, the group is largely focused on healthcare and houses standouts from Amazon's internal competition "Think Big," according to CNBC. 

Each year the top brass, including Jeff Bezos, hear pitches from anyone at the company with a grand idea for what Amazon should tackle next. Winners are given funds and a spot on the elite Grand Challenge team to build out their ventures.

Several people within the organization have strong healthcare backgrounds and report directly to Parviz, who reports directly to AWS CEO Andy Jassy, according to CNBC.

Several hospitals and companies are using Alexa devices to care for patients in new ways.

Amazon says that Alexa is a "cloud-based voice service," meaning a voice service that works with the internet, available on hundreds of millions of devices from Amazon and third-party sellers. 

They're used for shopping, smart-home functions like light adjustment, streaming music, ordering pizza, and, for the past year or so, helping folks manage their health conditions. 

In April 2019, the Alexa team announced that it could host programs dubbed "skills" made by health systems and other medical groups that transmit protected health information. That largely marked the devices' foray into healthcare, from setting up prescription deliveries to same-day appointments at local urgent-care centers.

Now providers like the Mayo Clinic, health plans like Anthem, pharmacy benefit managers like Express Scripts, and digital-health giants like Livongo are all using Alexa on some level to provide care at home, according to Amazon. 

Read more: A key member of Amazon's health team just left to join a venture firm that's launching a mental-health-focused startup


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