Amazon’s One Medical acquisition will disrupt US primary care

In July 2022, Amazon announced it would acquire One Medical, a digital-health-enabled primary care organization. One Medical, a San Francisco-based membership service, offers consumers in-person and virtual doctor visits. It marks one of Amazon’s most significant acquisitions as it prepares to scale up its digital-health-enabled primary care offerings. This acquisition impacts consumers, who will likely access it as Amazon Prime customers, and other digital-health-enabled primary care providers, many of which, along with One Medical, we profiled in the HFS Digital Health Primary Care market scan.

Big tech’s approach to healthcare is becoming selective

Big tech companies, including Facebook, Apple, Microsoft, Google, and Amazon (FAMGA), have been trying to disrupt healthcare for years. Efforts such as Haven Health from Amazon, Health Vault by Microsoft, Google Health, and HealthHabit from Apple struggled to make any headway. There are three primary reasons for their lack of success:

• Technology firms can’t deliver healthcare by themselves: Healthcare enterprises must augment technical expertise with domain expertise, time, and money to address issues such as complex data, privacy concerns, and interoperability challenges.
• Use cases are ahead of their time: There are several examples where a use case that failed a few years ago worked recently, including Call9, Lantern, and HealthSpot. These healthcare service providers tried to establish a business. They could not gain customers, closing their operations a few years later. During the pandemic, the same business case, such as telehealth and remote patient monitoring, has shown traction.
• Big tech lacks an ecosystem approach: Most big tech has been trying to improve healthcare outcomes alone. Healthcare requires an ecosystem approach that can help provide access to a broad range of external capabilities, including domain expertise, product experience, and speed to market. The approach also helps scale up offerings and improve outcomes.

Amazon healthcare expertise has been a work in progress

Amazon’s healthcare strategy evolved as it pursued finding its niche. It has built its solutions and capabilities through the organic and inorganic investments shown in Exhibit 1.

Amazon began acquiring healthcare capabilities in 2018 with online pharmacy PillPack for about $1 billion. PillPack manages prescription medications for its customers by packaging, organizing, and delivering them. This service helped Amazon to launch Amazon Pharmacy in 2020, which allows its customers to complete a pharmacy transaction on Amazon’s website or its app.

In 2019, Amazon acquired Health Navigator, a technology and services provider to digital health companies. The same year, Amazon launched Amazon Care, a primary care service, for some of its employees. It was expanded nationwide in 2022, buttressed by the launch of enhanced offerings, tech, and partnerships.

Exhibit 1: Amazon’s healthcare journey

Source: HFS Research, 2022

Amazon’s acquisition of One Medical reflects fulfilling its strategy to become a one-stop shop for all primary care needs. The strength of One Medical will help Amazon strengthen its primary care offering and expand its footprint. Amazon Pharmacy and the One Medical acquisition will make it easier and more convenient for consumers to get diagnoses and procure medication as prescribed by their doctor.

Amazon will gain significant leverage in influencing US healthcare by providing One Medical access to its more than 100 million Prime customers. Amazon will now also be able to target Medicare patients; One Medical had previously acquired Iora Health, a primary care firm focused on serving patients with Medicare Advantage plans, assigning each Medicare member a provider, nurse, and health coach.

Amazon has augmented its core technical expertise with domain expertise using different acquisitions, improving its ability to address healthcare complexities. In a recent study, we found that health consumers increased their adoption of telehealth services during the pandemic and are likely to stay with it. We found that 60% of health plans offer telehealth, 59% of health systems offer telehealth, and 28% of health consumers use third-party telehealth with subscription plans. This augurs well for Amazon as it takes an ecosystem approach by partnership (Crossover, Ginger, Teladoc) and acquisitions (One Medical, PillPack), helping them address the three barriers mentioned above.

The Bottom Line: Amazon will become the leader in primary care in the US thanks to the combination of One Medical and Amazon Pharmacy with Amazon Prime’s reach and access.

Amazon will continue to make strategic acquisitions to build a robust primary care base that is affordable, accessible, and improves health outcomes. It will disrupt health insurance for primary care in the US, as we published in January 2022. Amazon is slowly revealing an exciting collage of its capabilities to address health and care needs in the US. With a growing list of services such as primary care, Amazon Pharmacy, medication adherence, Amazon Care, fitness band Amazon Halo, Alexa-powered devices, and access to Medicare patients, Amazon is moving up the value chain. It will be exciting to see how Amazon will change healthcare.