Amazon Deepens Their Healthcare Reach
Amazon made its biggest healthcare play yet. In a $3.9bn all-cash deal, Amazon acquired One Medical, membership-based telemedicine and virtual healthcare provider.
One medical gives members primary healthcare over video chat at any time of the day and referral to a physical location if need be. They have nearly 200 locations, a network of thousands of doctors, and over 767,000 member patients as of May.
The company went public in January 2020 at $14; at its peak in February 2021, it traded at almost $60 apiece. From March 2021 to May 2022, the stock fell almost 90% to $6. This month, Amazon swooped in and acquired them at $18 a share.
What’s in it for Amazon?
This is not Amazon’s first venture in healthcare. Amazon has slowly been building up to becoming a significant player. Amazon acquired Whole Foods, a healthy food supermarket chain, for $13.7bn in 2017. In 2018, Amazon acquired online pharmacy PillPack for $753m and launched Amazon Pharmacy in 2020 as a prescription delivery service.
In 2019, Amazon started Amazon Care, a 24/7 texting and video service app for Amazon employees to connect with clinicians. This year, Amazon expanded their services nationwide and opened in-person services in 20 cities across the US.
Amazon Web Services stores health data for many hospitals and health systems. The service has its natural language processing system trained to understand and extract health data from medical text such as prescriptions, procedures or diagnoses.
Now add fitness trackers, Alexa voice assistants and other health and wellness products sold on Amazon, and you see the big picture here for Amazon.
All these things exist in silos within Amazon’s ecosystem; if/when they put them together, it could completely change the consumer health experience and generate a lot of value for Amazon. The global telehealth market revenue is projected to increase from $70.5 billion to $598.3 billion in 2028. If Amazon can get the healthcare integration into its business right, it could generate billions in revenue and profits.
How could this work?
People can go on One medical, get a prescription, and have it delivered in an hour using Amazon Prime delivery services. Or a doctor on One medical runs a blood test on a patient and prescribes a change in diet; if the patient consents to it, that can be sent to Wholefoods to execute.
Amazon is the King of controlling the value chain from end to end. This One Medical acquisition is another step in owning a critical part of the value chain.
This acquisition also raises questions about medical data and privacy. By law, Amazon cannot use patient data outside One Medical’s silo. However, patients can consent to have their data shared under specific situations.
People are generally wary of Big Tech companies’ control over users’ data. The acquisition of One Medical could make some users leave the platform simply because Amazon now owns the company.
The deed is not done yet, but the acquisition needs to get regulators’ and One Medical’s shareholders’ approval before it is completed.
Economists and investors believe the global economy will slow down in the next 18-24 months. However, the stock market has shown to be improving in the last few weeks. These companies are likely making these moves to tap into the growth they can get from investors’ excitement while it lasts.
Tech giants are being strategic, and this is why we have structured our portfolio such that it can benefit from these excellent business executions. You can start building a stock portfolio today.