Amazon Poised to Shakeup Healthcare

Following through on its mission to be the “earth’s most customer centric company,” Amazon is positioned to enter the $3.5 trillion healthcare market. The sector takes up 18 percent of the United States’ GDP, making it an attractive target for Amazon. In the past year, Amazon partnered with Berkshire Hathaway and J.P. Morgan for an employer health initiative, acquired the pharmaceutical start-up PillPack, filed a patent for Alexa to pick up on a cold or cough and announced a product to collect patient medical records.

However, while Amazon has a history of transforming business sectors, healthcare is notoriously complex and resistant to competitive forces. Proponents argue that the company is dedicated to innovation and disrupting markets, giving it an edge over other healthcare businesses. Critics, on the other hand, believe that this is not enough to overcome Amazon’s lack of expertise. Both sides of the argument have merit. However, with all the uncertainty at this point, it is difficult to predict whether Amazon will succeed or fail. In this case, it is more interesting and worthwhile to think about how the company might go about revolutionizing healthcare in the first place.

Amazon has always focused on services that need to be delivered to a customer. Assuming it continues to do this, certain business models are more promising than others.

For one, Amazon can integrate healthcare into people’s everyday lives. Currently, most people do not monitor their health enough. According to the Center for Disease Control, seven out of ten Americans die each year from chronic diseases, many of which are preventable. Instead of preventing diseases, the current health care system incentivizes patients to get treatment only after they become noticeably sick.

Amazon has the potential to counter this. Using Alexa, the virtual voice assistant, Amazon will detect coughs and sneezes. This catches illnesses early on. Then, as Christina Farr of CNBC posits, Alexa can respond by booking an appointment at the doctor’s office or getting the patient a virtual consultation through video call or messaging. If patients choose the virtual option, they have the choice to get portable tests mailed to their home and sent to the lab afterwards. This is already technically feasible for diagnostic tests such as blood draws and strep throat cultures. With the company’s acquisition of Pillpack, a full-service pharmacy that helps people manage multiple medications, medication can also be delivered straight to a customer’s home once they are prescribed. Additionally, Amazon already has the advantage of having a two-day delivery system infrastructure. It would be able to test patients and deliver medication faster and easier than any of its competitors.

Ideally, an Amazon customer would never even need to leave home to get treatment. This makes health care more convenient and accessible. Patients in rural areas may live far away from hospitals, and others have debilitating conditions that make it extremely difficult for them to move around or even get transported. For them, Amazon’s model would elevate their quality of care exponentially. And for everyone else, the initiative promotes prevention-based health care. By catching illnesses earlier on, not only do patients get health benefits, but unnecessary health care spending is reduced. Crucially, it will reduce the strain on emergency treatment facilities and make health care more efficient.

Beyond this, Amazon may also provide other stand-alone services. According to Dr. Josh Luke of Forbes, a priority in the medical field is addressing the needs of patients with memory loss. There are people with chronic diseases that require prompts and reminders for complicated medical regimens. An Alexa can be programmed to set alarms for such patients, decreasing their need for an expensive caretaker.

In the coming years, other applications of Alexa in the healthcare setting can be expected. Amazon has partnered with pharmaceutical company Merck for a challenge to inspire Alexa developers to create skills to help people with diabetes manage their conditions, as reported by Huron Consulting Group. Hospitals are also experimenting with Alexa—using it to help surgeons create check lists or share information with patients once they are discharged.

In essence, Amazon has the potential to create what Harvard Business Review writer Robert Huckman calls a “closed loop system.” Amazon will be involved in every step of the illness experience. Through consolidating healthcare, Amazon makes it more accessible, and therefore more effective.

Secondly, Amazon could capitalize on data. Personal data is increasingly being sought after by healthcare delivery systems. For example, big pharma aims to produce the most effective drugs, and a major part of that goal is finding what is optimal for each patient, which depends on their genomic information and medical preferences. Amazon offers a distinctly different set of data points than other companies—it has a wealth of information about their customers and their purchasing habits. It is possible for Amazon to develop algorithms to identify the purchase patterns and health information of high-risk patients. Existing healthcare delivery systems could use Amazon as a supplier of information as they try to prevent sicknesses and make sure patients stay healthy.

The data can also be applied by Amazon itself. Once the company is in the healthcare space, health information (such as Alexa reminders and Pillpack information) can add to consumer insights. Amazon could suggest food and vitamins to customers to help them manage their health. These recommendations could be for products that customers did not even know they needed. As a recent addition to the Amazon conglomerate, Whole Foods may play a role in this business model. The grocery store can stock and sell the recommended products based on users’ health data. Strategy and innovation consultant Ashley Brady explains that this would be a cost-effective and value-based method of care. Existing Whole Foods customers can easily become more health conscious. Others have an in-person product distributor readily available to them, if they choose to have one.

If Amazon is indeed successful in entering the healthcare sector, then it is likely through data analytics and by making healthcare more accessible in day-to-day life. Of course, there are still many uncertainties about the company’s future path, and some of the models above may eventually prove improbable. Obstacles relating to market competition and consumer privacy all have the potential to derail Amazon’s expansion. Yet, analyzing Amazon’s potential business models has revealed and confirmed some intuition about the company’s strengths and weaknesses. Amazon is much more likely to succeed in health care if the sector is looking to improve operational execution and customer service, and it is much less likely to if the sector wants to gain a deeper understanding of the core of medicine and health.