CNBC noticed Amazon quietly launched a partnership in August with OTC manufacturer Perrigo to create their Basic Care line of products. While Amazon may not be the ideal fix for when you need that bottle of cold medicine ASAP, the company could be in a good position to corner the market on products that are bought in bulk like nicotine gum. Apple’s healthcare foray is more tech-focused: they’re developing the next attempt at personal, electronic health records. The idea is to use patients’ smartphones as the unified repository for health records that could otherwise be scattered across healthcare providers. More complete records and data could drive recommendations for care, and could even translate into partnerships with pharma companies to pitch their products directly to consumers fitting a certain profile.
According to a recent McKinsey whitepaper titled “The future of healthcare: Finding the opportunities that lie beneath the uncertainty,” it’s good to be in healthcare in the US. And it seems that being a large company in healthcare is better (insert you favorite “size matters” reference here). McKinsey did an economic assessment across various parts of the US healthcare system (insurers, delivery systems, service vendors, and manufacturers & distributors) and found that margins increase with scale. No duh, but what’s interesting is how that scale is being achieved and, in a word, “complexly.” Yep, complexly. The major takeaway is that your organization needs to be agile and actively manage your portfolio across the value chain, not just in your core business. Oh, and they talk about Amazon too, because apparently you have to. It’s a rule now.
Now that Amazon, JPMorgan Chase, and Berkshire Hathaway have their healthcare sandbox to play in, guess who is a lot further along? Nope, not Dr. Feelgood, it’s the Chinese. According to a recent NY Times article, “tech companies like Alibaba and Tencent have made health care a priority for years, and are using China as their laboratory. After testing online medical advice and drug tracking systems, they are now focused on a more advanced tool: artificial intelligence.” A few tidbits about health in China = 1.5 doctors for every 1,000 people (~half the US), largest number of obese children in the world, and they have more diabetes patients (110 million) than anywhere else. And money is flowing everywhere. Tencent, the internet giant, is reportedly plowing tens of millions into American health tech start-ups. If you’re a person, this is good news, as more tech should equal better health.
There have been rumblings for a while now that Amazon would somehow be entering the healthcare space to shake things up. Well last week Amazon officially made its move, bringing heavy hitters Berkshire Hathaway and JP Morgan Chase along too. What do two of the world’s richest people and the leader of the US’s largest bank plan on doing exactly? That’s a great question, and we’d love to tell you if there were any kind of concrete details to explain the venture. We do know the goal is to “improve US employee satisfaction while reducing overall costs,” and that they plan to use technology to do it. Sounds vague, but the news was scary enough for investors sent insurer and drug store stocks tumbling after the announcement.
According to a report by CNBC, Sandoz “does not expect Amazon to have a major impact on its business.” Wait, what? Fine, we’ll back up. Amazon is still sniffing around the pharma world. This time, it’s talking with generic drug giants, including Mylan and Sandoz. While the specific topics of conversation remain unclear, the smart money is on wholesale / distribution, right? What do you think is happing in the “war rooms” at McKesson, Cardinal Health, and other leading distributors? How does an industry defend against a cash-flush company that doesn’t seem to worry about profitability? That’s why InsightCity is no longer considering Cardinal Health as an acquisition target. Yep. That’s why.
A while back we wrote on the possibility of Amazon entering the pharmacy market. Don’t look now but, Amazon has received wholesale pharmacy licenses in at least a dozen states. Remember Amazon recently purchased Whole Foods, so now there’s a local distribution option too. As one former Amazon employee stated, “executives at pharmaceutical companies should crush all assumptions when it comes to Amazon and their ability to enter, innovate and reimagine the pharmacy business and health care.” It’s amazing the havoc Amazon can create just by showing some interest in an industry. Will Amazon “just” do mail-order, or add retail, or become a PBM, or deliver healthcare through the Echo? Not sure, but as Amazon knows, it’s better to be rich than poor and here are 25 reasons why.