The news: Amazon is acquiring primary care disruptor One Medical for nearly $4 billion.
What’s driving the sale? It could be the economic downturn—as we predicted.
Earlier this month, One Medical was mulling a sale to CVS. At the time, we posited One Medical would likely seek shelter under a healthcare giant’s roof as health tech companies like it become more financially cautious in an era of economic uncertainty.
The One Medical deal will beef up Amazon’s healthcare presence in 3 key ways:
1. Access to a ton of new employer clients.
It’s been over a year since Amazon’s telehealth business (Amazon Care) scored its first employer client.
2. An entry point into direct-to-consumer (D2C) care.
Up until now, Amazon Care has only worked with employers. But our prediction that Amazon Care could expand to include D2C seems even more likely to occur post-acquisition.
3. Growing its Medicare patient base.
As of last September, One Medical owns Medicare-focused primary care clinic Iora Health.
What’s next? Amazon could set its eyes on a health insurance acquisition next to provide a connected ecosystem of care—but it won’t be easy.
Red tape makes health insurance an extremely difficult business to build from the ground up. That means it would make the most sense for Amazon to acquire a health insurer like Humana to complete its care ecosystem.
Having an insurer under its belt could help Amazon compete with retail players like CVS, Walmart, and Walgreens. So far, CVS is the only major retailer to bring a legacy insurer like Aetna under its roof in a whopping $69 billion deal finalized in 2018.
Digital Health Analyst Takes: Insider Intelligence principal analyst Lisa Philips and senior analyst Rajiv Leventhal weigh in with their takes on the news.
"Amazon is clearly looking to disrupt primary/retail healthcare and telehealth. Amazon was already in the primary care market with its Amazon Care virtual care offerings for enterprise clients. Now, its presence becomes much stronger as One Medical’s services reach nearly 800,000 members across 25 US markets. This acquisition puts Amazon in close competition with CVS Health and Walgreens' primary care ambitions.
Amazon will likely look to expand into more US cities, and in the near term could bundle One Medical subscriptions with its Amazon Care offerings as it looks to reel in more employer clients. It also wouldn't be a surprise to see Amazon's next healthcare play to boost its Amazon Pharmacy with a pharmaceutical acquisition—and beyond that, buying an insurance company as CVS Health did with Aetna."
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