Last November, when Amazon Pharmacy was first announced, I wrote that this was only a hint of Amazon’s broader ambitions within healthcare. I argued that Amazon Care, the company’s virtual care benefit service for employees, was actually a more exciting development:
For those familiar with Amazon’s history, Amazon Care is a thrilling look at just how big the company’s plans may be in healthcare. AWS started out as an internal cloud service that eventually launched to external customers and became a hundred-billion dollar product. Amazon Logistics began as an internal shipping service that has grown to rival UPS and FedEx since its external launch in 2018. Could we, in 10 years, be walking into clinics run by Amazon Care?
Two weeks ago, Amazon announced that it will begin offering Amazon Care as a workplace benefit to all companies starting this summer and expanding the service geographically across the country. Although my hypothetical timeline of 10 years was comically wrong, I’m glad that my prediction wasn’t totally crazy, and I’m excited about what this means for healthcare.
The great virtual care convergence
First of all, what exactly is Amazon Care? It’s a service where patients use an app to get access to a range of on-demand healthcare services, including telemedicine visits, preventive care, prescription requests, COVID-19 testing, etc. It’s essentially a virtual care platform, with the caveat that Amazon Care will allow patients to request in-person care for specific procedures like blood draws in certain parts of the country. We’ll talk about the importance of this nuance later.
On the surface, Amazon Care isn’t a groundbreaking product — the virtual care model has been pretty well-proven by now, and in the past year or two, there’s been an explosion of companies announcing their own virtual care services. It’s important to note, however, that this isn’t a situation where copycats are popping up to chase an incumbent after they’ve validated a market. Most of these companies started off in adjacent opportunities like telemedicine (Teladoc, Amwell), digital pharmacy (Ro), or insurance (UnitedHealthcare, Oscar), and have decided to expand into virtual care to broaden their offering.
There’s a reason why all these companies have independently chosen to move into virtual care, despite increasing competition in the space, and it’s best understood by using the framework of Aggregation Theory. Ben Thompson, who writes Stratechery, has said before that the fundamental disruption of the Internet is making distribution of digital goods free. As a result, traditional companies that succeeded by integrating with suppliers while owning distribution no longer have an advantage, and new companies can take over by doing the opposite — aggregating relationships with consumers.
I’ve written before about how it is very difficult to become a true aggregator in healthcare, because a lot of healthcare just need to be delivered in person. This obviously includes complex things like surgeries but also simple things like blood draws and vaccines, all of which can’t be treated as digital goods. Virtual care, however, is pretty much the closest we have come to successful aggregation in healthcare, which is why so many companies are moving into the space. It allows companies to own the relationships with consumers and commoditize the relationships with suppliers (in this case, providers on the platform). This also comes with secondary benefits, like being able to collect a wealth of data to improve outcomes or being able to develop a loyal brand following.
Differentiation will require broadening services
Considering how crowded the virtual care space has become, how will companies differentiate their services from each other, and where does Amazon Care fit in? The answer is by optimizing the patient experience and providing the broadest suite of possible services for patients.
One important category of such services are digital tools. These can include connected devices like glucose monitors or wearables like the Apple Watch that are used to capture data or improve outcomes remotely. As more digital tools hit the market, it will be interesting to watch how virtual care companies bring them into the fold. One approach is through M&A, and it wouldn’t be surprising to see more deals like Teladoc-Livongo get done. In this case, M&A might actually be the ideal strategy, because it prevents other platforms from being able to use the same tools while enabling tighter integration across the stack. Another is by developing their own digital tools, like Amazon has done with the Halo fitness tracker which launched last December. While reception has been lukewarm to date, due to competition and privacy concerns, there are clear synergies with Amazon Care incorporating the Halo tracker into its service.
Another category beginning to emerge within virtual care platforms is mail-order prescriptions. Ro, as one example, started off as an online, mail-order pharmacy, and is using that as a launchpad to move into providing broader services. The potential for Amazon on this front with Amazon Pharmacy is obvious, and the convenience of prescription deliveries and on-demand refills will be an important part of Amazon Care’s initial value proposition.
Counterintuitively, a third category that may prove to be the stickiest differentiator is in-person care. I mentioned earlier that healthcare defies aggregation because many healthcare services can’t be delivered virtually. With that said, companies that do find a way to seamlessly bridge the online-offline gap will have an advantage that is difficult to surmount. The reason Amazon Care is so exciting is because there are few companies better positioned than Amazon to tackle this challenge.
From an operations standpoint, Amazon is the odd one out among Big Tech companies. They are a leader in digital technology, but they also maintain a gargantuan physical footprint uncharacteristic of tech companies. In some ways, Amazon has already grappled with the challenge of an online-offline gap within retail, for products that consumers are reluctant to buy before trying. Amazon Care’s pilot program allowed patients in Seattle to request in-person care from a medical professional for specific procedures like blood draws. While this option will only be available in a few cities to start, the idea that it may one day be offered nationwide is very exciting (and for Amazon, believable too).
Amazon Care and Whole Foods: a not-so-crazy match
Amazon’s acquisition of Whole Foods in 2019 might be the best example of how the company isn’t afraid to have a physical footprint. This deal also enables what I think would be the most exciting differentiator for Amazon Care, and the most impactful development for healthcare — a partnership with Whole Foods where grocery shopping data and behavior is used to improve outcomes.
Yes, it sounds like a crazy pipe dream, but I assure you it’s less crazy than it sounds. Since 1960, healthcare expenditures have increased from 5% of US GDP to 18%, with no sign of slowing down. At a certain point, it will become impossible for any company not to care about healthcare costs and outcomes, and in some sense, every company will become a healthcare company.
There are countless ways to approach this challenge, but one that’s relevant here is figuring out how to unlock the hidden 40%. Vijay Pande from a16z has written before about how the things we define as healthcare — surgeries, drugs, diagnostics — only contribute 10% to premature death. A whopping 40% is driven by behavioral patterns, a category we’ve only begun to scratch the surface of. Although the health impact of nutrition is notoriously difficult to study, our eating patterns are certainly an important part of this 40%.
If you’re intrigued by this direction, I would recommend you read Nikhil Krishnan’s article “Food as medicine”, where he discusses the current evidence around food-centered interventions for health. The upshot is that it’s very promising — Geisinger’s program of prescribing free food for diabetes patients saved about $20k per patient per year. To do this, however, Geisinger had to open their own grocery stores, raising the upfront costs considerably. Amazon Care would be able to do far more through a Whole Foods partnership, both observationally — by running longitudinal studies to evaluate the impact of food on health — and prospectively — by using better nutrition to actually improve outcomes.
On its own, Amazon Care becoming available to companies as a workplace benefit may not be a game-changer — the virtual care space is already crowded with an assortment of incumbents. But like Amazon Pharmacy, it’s a telling signal of the company’s broader ambitions within healthcare. Amazon has toyed with crazy ideas for the industry before. If the trend continues, all the better for its customers, and for us as patients.
Amazon's growing portfolio of echo, Prime Fresh, eero mesh WiFi, Pharmacy, Halo wearable, Amazon Care and more are all chapters in a book that eventual ships with the title Prime Health. This allows Amazon to realize a full health benefit plan for US consumers with all current Prime benefits plus healthcare with dynamic pricing. They already know everything about you to price risk. And Fresh (what you eat), eero (how you sleep) and Halo (how much exercise you get and your mood) allow you to earn deductions on the monthly subscription. That drives utilization of the full Prime-commerce platform and Whole Foods with health benefits as the key driver.