Health-Care Industry No Longer Afraid of Amazon’s Might!

Amazon.com Inc.’s Prime membership program initially focused on fast shipping and later expanded to include video streaming. Now, customers can enjoy the added benefit of discounted access to virtual doctors, which is being presented as another convenient feature, comparable to purchasing tube socks or watching television shows.

But that is a kind of surrender. Amazon has spent nearly a decade and billions of dollars trying to reinvent American healthcare, and it’s settled on a decidedly traditional approach. The company operates its own doctor’s offices and pharmacies and offers Prime subscribers a $100 discount on membership at One Medical, the concierge primary care chain it bought in February. In highly regulated cold treatment and pill dispensing, the strategy is familiar, though the technology has been used, and it disappointed industry observers who had hoped the company’s long-awaited entry into healthcare would mean radical breakthroughs.

Over the past eight years, Amazon has launched and abandoned several healthcare initiatives. Haven, a joint venture with Berkshire Hathaway Inc. and JPMorgan Chase & Co. that sought to lower corporate health insurance costs, was shut down after little progress. Amazon Care, a telehealth service that promised virtual access to doctors in minutes, abruptly shut down last year just 17 months after its wide launch. In July, the company removed a line of wearable health and wellness devices after they failed to reach consumers.

Today, Amazon relies mostly on two existing companies — One Medical and PillPack, a mail-order pharmacy it bought in 2018. Patients like both, but they largely overlap existing services and were unprofitable before Amazon bought them.

Peers in the tech industry, such as Apple Inc. and Google parent Alphabet Inc., have also poured time, talent and billions of dollars into their own efforts to disrupt the famously entrenched health care industry, with equally poor results. Apple has started, delayed and abandoned several projects, including a glucose meter and consumer health clinics. Meanwhile, Google has launched a number of initiatives, including glucose-sensing contact lenses and a platform for early detection of heart failure. None of them have significantly improved healthcare provision or outcomes for patients; all have been edited or scaled down.

To understand why Amazon hasn’t made more progress, Bloomberg interviewed dozens of current and former employees, patients, competitors and industry analysts who have closely followed the company’s efforts to break into healthcare.

Current and former employees describe a culture of arrogance, fueled by the belief that a Silicon Valley-style invention could beat the industry’s incumbents. These people say time and again that Amazon has ceded control to executives with little or no experience in health care, often ignoring the advice of industry experts hired to guide the effort. Strategic discussions took years, so by the time Amazon introduced such innovations as online doctor visits, fast drug delivery, and discounts on generic drugs, they were already commonplace.

Neil Lindsay, the veteran executive who heads Amazon’s health services group, disputed parts of that criticism. “I actually think we approach this with a lot of humility,” he said in an interview. “We’re going to have some hits and misses, and we’re OK with experimenting and learning.”

But Wall Street is growing impatient with any experiment. Mark Shmulik, an analyst at Sanford C. Bernstein, wrote a research note in June criticizing Amazon for making too many speculative bets outside the company’s expertise, including what he saw as a vague, self-imposed mission to “find out about health.” care.” In an interview, Shmulik said the company should narrow its focus and cut spending on health initiatives. “I’m always very skeptical of trying to take too big an approach to health care,” he said.

Amazon CEO Andy Jassy has told investors that healthcare is one of the company’s biggest long-term investments, one of the few areas where success can move the needle for a company expected to generate more than $500 billion this year. Amazon’s healthcare efforts date back to at least 2015, when the company hired Kristen Helton for the Grand Challenge, the company’s in-house incubator for the kind of big, quirky bets that then-CEO Jeff Bezos hoped would advance his company beyond e-commerce. .

Helton, a bioengineering doctor, co-founded a startup that built skin implants designed to monitor oxygen, glucose and other chemical markers in the body. Shortly after joining Amazon, Helton proposed a primary care service that would allow people to see a doctor through an app with a few taps on their phone. The idea was accepted and he began hiring and assembling a team.

In line with longstanding practice, executives borrowed talent from other teams, including the cloud department, and unleashed them on an exciting new project. Full of confidence, dozens of managers and software engineers joined Helton’s team. They quickly proposed building many healthcare tools from scratch, including prescription writing software and an electronic health record system. Health care veterans on staff steered them away from most of those efforts, which they feared would be expensive and duplicative, in favor of working on tools that directly impacted primary care. However, the discussions lasted for months.

By 2021, Amazon launched products from the moonshot lab, including a children’s video conferencing device and a virtual travel app. That spring, about five years after Helton was hired, the company launched Amazon Care. The service seemed much longer than the original. After downloading the Care application, patients can start a text chat with the nurse or request a virtual visit or home care. However, there was one big difference: you couldn’t just go to the doctor. Your employer had to register first. Care’s first director of business development, Nicole Bell, had recommended selling the new service to corporate benefit departments. Amazon, a potential disruptor, is going through the existing system.

The first customer was Amazon itself. Feedback from patients was almost universally positive. Jassy, who had expressed some skepticism about the service’s business model, loved it, according to one of his reactions. But Amazon had trouble persuading other companies. Companies tend to purchase health care for their employees as part of a laborious, years-long process. The bottom line: Amazon had arrived with a product that looked a lot like existing telehealth services, and few companies were willing to disrupt established relationships for a newcomer with no experience.

The service managed a few big signings. Peloton’s fitness equipment manufacturer Precor was the first external customer. Months later, the team celebrated when they signed Hilton, a hotel chain, and Care Medical, which added nurses to handle the expected rush of new patients. However, according to former Amazon Care nurses, business remained slow. Some potential business customers backed out because Amazon wouldn’t let them terminate the contract if the service didn’t meet usage goals. Others wanted evidence that Care lowered costs. Amazingly, for a company that prides itself on unscrupulous data compliance, Amazon sellers had little empirical evidence to offer, only glowing experiences from its own employees.

Amazon Care slowly gained business customers. But doctors and Care salespeople say few of those companies’ employees used the service. An Amazon Care nurse in the Midwest says she went hours without seeing a patient and was essentially paid to do nothing.

By then, Amazon was considering a completely different plan. For years, Lindsay, a health services manager, had been going to One Medical, which serves urban professionals with sleek medical offices, an app and an Amazon-like mantra to keep patients happy. Although the chain had never turned a profit, it had 8,500 corporate customers, including Alphabet. “We’ve always kept our eyes open, and you know, one thing led to another,” said Lindsay, who suggested Amazon buy the company.

The One Medical deal came as a surprise — not least to Amazon Care employees. Many were already worried about their future. Helton had left months earlier and was replaced by Kindle veteran Aaron Martin, who previously served as the Seattle-area health system’s headquarters in Providence. Martin soon began preaching about profitability, which led some of his subordinates to suspect that Amazon Care was in trouble. A few months later, they learned via a pre-recorded video that the company was going out of business. The treatment was stopped in December. About 400 people lost their jobs in Washington state and hundreds more elsewhere.

Amazon Pharmacy has also struggled to differentiate itself from CVS, Walmart or Mark Cuban Cost Plus Drug Co. The online pharmacy was built on top of PillPack, which was a pioneer in mail order deliveries. It uses a highly automated system to sort the drugs into packages that are tied together in a long segmented strip and sends them to customers. Patients tear open the package in time for the next dose, until the roll is finished, when a new one arrives – a PillPack coordinated between insurance companies, drug suppliers and doctors. For customers, the PillPack model alleviated the fear of keeping the pills straight.

Analysts generally recommended the acquisition, but the PillPack integration got off to an inauspicious start. After merging the current staff with PillPack into a new online pharmacy department, the company asked Nader Kabban to lead the unit. The longtime Amazon executive, who had worked in logistics and the Kindle e-reader, lacked the healthcare expertise to make big decisions without consulting PillPack founders TJ Parker and Elliot Cohen. Months later, Parker began reporting to the company’s head of retail instead. Kabbani, who left Amazon earlier this year, declined to comment.

At the same time, Amazon wanted to display drugs online much like regular products, with transparent pricing that included what kind of discount it was offering. It was never easy because drugs, highly regulated products whose prices vary by manufacturer or insurer, didn’t fit neatly into the software that powers Amazon’s retail site. And when Amazon Pharmacy launched in November 2020 — 29 months after the PillPack deal — it lacked some of the price transparency features executives wanted.

The service’s prescription discount card was also based on drug prices negotiated by InsideRX, a unit of pharmacy giant Express Scripts Inc., which is the industry’s definition of an incumbent. As such, the site was a disappointment to some health industry critics. “Maybe one day Amazon will be a real disruptor,” pharma consultant Adam Fein wrote after the launch. “For now, Amazon chooses to join the drug channel, not fundamentally change it.”

Eventually, Amazon figured out how to show patients the price of a particular drug — a real innovation, Parker says. But it wasn’t long before competitors offered similar tools. In August, GoodRx introduced a tool that allows doctors to check the price before prescribing a drug — even taking into account the patient’s insurance coverage.

Since then, Amazon has added sweeteners to entice Prime subscribers to use the pharmacy service or sign up for One Medical. Launched in January, RxPass delivers any of a list of 53 generic drugs to patients for $5 a month. Amazon says the all-you-can prescription plan has caught the eye of its pharmacy division, but the company isn’t the first to try it. Among others, Walmart and Mark Cuban Cost Plus already offer cheap generic drugs. CVS and Walgreens, on the other hand, have stores on thousands of street corners and offer the ability to get help on the spot when someone is sick. The small print on the Amazon Pharmacy website even recommends that those with urgent needs visit a physical pharmacy. Amazon has yet to open one of them, although it is testing fast delivery of drugs as part of drone delivery trials in Texas.

Market intelligence service Sensor Tower estimates that monthly active users of the One Medical smartphone app have increased by 16% in the months following the sale compared to the same period of the year. Measuring Amazon Pharmacy’s progress is difficult. Amazon says the unit doubled its active customers from 2022 to 2023, without providing specifics. Three people who worked for PillPack say that after Amazon Pharmacy launched, demand did not match the company’s expectations. “It really hasn’t made a big dent,” said Lisa Phillips, principal analyst at Insider Intelligence, who, based on data from Kantar MARS, estimates that 8% of U.S. drug buyers have used Amazon. “I don’t think anyone is afraid of it anymore.”

PillPack founder Parker, who left Amazon in September 2022, says the company’s bids to be the default pharmacy for some insurance plans are big developments that have gone relatively unnoticed. He admits that Amazon is not yet a major player in health care, but says it is further along than any company that got into business during PillPack’s time.

“That in itself, I think, is a success, and they’re going to continue to try to make it better,” said Parker, who is now a general partner at venture capital firm Matrix Partners.

In the meantime, Amazon continues to roll out new health programs. One is Amazon Clinic, a text and video chat-based treatment service that charges $30 to $80 per visit and does not accept insurance. Unlike Amazon Care, which required the company to hire hundreds of doctors and nurses and stock home offices with expensive computers and medical equipment, Clinic is a marketplace where Amazon acts as an intermediary — a familiar role for a company that already has millions of merchants. its retail site. “If we can make some things a little bit easier for a lot of people, that will save a lot of time, money and better health outcomes,” Lindsay said. “Obviously, our goals are bigger than that, and we can see areas where we can make it a lot easier for a lot of people.”

Amazon Clinic refers patients to doctors from four healthcare providers. For minor complaints like acne, doctors might spend 90 seconds with a patient using a text chat interface, compared to 15 minutes in an office visit, says Matt Hodges, vice president of Florence Labs, which offers similar services. In addition, the doctor and the patient do not have to be logged in at the same time, but the work can be done at slow times of the day.

Amazon hopes Casey Peters’ experience will become the norm. About a year ago, the 42-year-old, who lives outside San Antonio, Texas, had to renew his cholesterol prescription when he switched doctors. Peters went to Amazon Clinic’s online portal, uploaded a picture of his pill bottle, selected a few questionnaires, and submitted his request. Twenty-one minutes later, he received an email linking him to a doctor in a Slack-like chat. The doctor quickly greenlit the prescription. Amazon Pharmacy delivered it the next day. “They kind of pulled it off,” Peters said. Earlier this year, he and his wife also joined One Medical, a discounted one-year membership from Amazon.