Amazon entering the health care space: Too big to fail?

At a time when tech giants are failing to gain traction entering the health care space, such as Alphabet shutting down Google Health in August 2021, Amazon continues to take steps forward in launching its own Amazon Care. Will this tech giant beat the odds and succeed? Or will it follow in the steps of others who have tried and failed?

Let’s start at the beginning and look at Amazon’s current position in health care.

With the health care industry now worth more than $3.8 trillion in annual spending, according to the Centers for Medicare and Medicaid, Fortune 100 companies are lining up to enter the industry.

The health care industry has always been slow to innovate, from government regulations to standardized processes, which makes it increasingly difficult for technology solutions to become widely implemented. It can take years for approval and adoption – making what once was an innovative solution, look behind the times. It’s an obstacle some tech giants like Apple and Alphabet haven’t been able to overcome yet.

Some, like Amazon, are taking a different approach. After acquiring PillPack in 2018, Amazon rebranded as Amazon Pharmacy to offer prescription drug delivery to consumer homes, including Prime two-day delivery to members. Amazon’s foray into pharmacy has already caused competitor shares to fall in the first half of 2021 following its announcements.

In early 2021, Amazon officially established Amazon Care, born out of Jeff Bezos’ exasperation surrounding health care expenses for its 1.3 million employees. Amazon Care, a virtual primary and urgent care system for their employees and family, has differentiated itself from other telehealth services as it provides speedier options and better access. The convenience of medical care within a minute, a 24/7 care team and in-home care became increasingly important to members during the COVID-19 pandemic.

Amazon Care has so far proved to be more successful than Amazon’s first venture into health care services, Haven, a collaboration between JPMorgan Chase and Berkshire Hathaway that disbanded after only three years due to the pandemic as well as insufficient leverage and a misaligned system.

Since the disbanding of Haven, Amazon has joined a lobbying coalition to encourage legislative change regarding home health as it continues to expand its entrance into health care. Amazon has had a hand in cash card drug programs, telehealth, employee health clinics and the prescription market.

So why is Amazon moving ahead where other tech giants have failed?

Amazon’s strategy is not a pharmacy strategy, but rather a health care strategy as it continues to blend the medical and pharmacy benefits. High deductible health insurance plans that blend the benefits together in the U.S have paved the way for a structural shift that fuels companies like Amazon to enter the market.

While Amazon might not have been the first tech disruptor to really enter the space and favor cash (Walmart claims that title), Amazon has found ways to combine health care and pharmacy and scale it into its already existing retail infrastructure.

Access is a big part of Amazon’s plan, with approximately 30 million people uninsured and 40 million people underinsured during a pandemic. Amazon is targeting consumers that don’t have easy access to health care. By moving towards a cash system, Amazon is bypassing the insurance companies and going straight to consumers.

Their global strategy goes beyond providing care and access – it’s also gaining data on users.

In the UK, Amazon Web Services has already started working with the National Health Service (NHS). There’s already a concern around how much consumer data Amazon collects from its e-commerce side alone. Amazon Web Services provides HIPAA-eligible services to support health care customers with HIPAA compliance; however, there is a growing concern on how much data consumers will be giving up for convenience.

Another hurdle Amazon can face is acute medications requiring immediate access. Regional pharmacies work around this by completing last-mile deliveries to serve consumers, beating mail delivery speeds like Amazon Prime. Chronic medications could be the foot in the door for Amazon, but with the current supply chain disruptions due to the pandemic, there’s no telling how reliable access will be.

Amazon in the past has done poorly in highly regulated industries, it prefers to target industries where they can control the whole supply chain, which in health care is incredibly difficult. The complexities of dealing with health care have already pushed Amazon to recruit C-Suite talent from across the health care industry to help them navigate as they continue this experiment into the health care industry. Only time will tell if Amazon’s entrance into health care is successful as they continue to expand globally, but with the major moves the tech titan is making, we expect positive innovations to come.

Susan Lang is CEO and founder of XIL Health.