Amazon making moves to disrupt US healthcare sector

30 May 2018

The e-retailing giant is edging into the ballooning US healthcare market, with the announcement that it had entered into a healthcare venture with Berkshire Hathaway and JP Morgan. In a recent report, L.E.K. Consulting expects Amazon to go deep into healthcare provision – and with a high probability of success.

The $3 trillion US healthcare system is the next sector that tech innovator and digital retailer Amazon may shake up next. The e-retailer recently announced a healthcare venture with conglomerate Berkshire Hathaway and bank JP Morgan. Though the venture is currently in its infancy, and reportedly concerned with lowering healthcare costs for the three companies’ million-plus employees, it is probable that Amazon and co. will look to shake up the healthcare sector to a wider degree.

A report from L.E.K. Consulting by Managing Directors Robert Haslehurts and Joseph Johnson argues that Amazon will penetrate deep into the heart of American healthcare, and will likely be successful. According to the authors, Amazon has shown the ability to disrupt industry after industry and attain dominance – from books to cloud computing. The company has also become a leader in AI tech with its Alexa platform. Amazon is now looking to apply its vast capabilities and coffers to non-retail categories like banking and healthcare.

In the case of banking, it makes sense for Amazon to move in because it has the capabilities to be successful (digital innovation, customer experience, data and analytics), as well as the incentive to eliminate the credit card fees it pays on transactions. Likewise, in healthcare, Amazon would benefit from lowering the high cost of healthcare since it is one of the largest private employers in the country. Similarly, Amazon also has the core competencies needed to compete in healthcare, including strong analytics, technology, and innovation.

Amazon’s best-in-class capabilities

Amazon is already putting its feelers out. In Japan the company will start Prime Now drug deliveries to consumers who have pharmacist approval, while in the US, Amazon has a team working on virtual doctor visits and medical records. Amazon’s initiative with Berkshire Hathaway and JP Morgan will give it a sandbox to experiment in before moving into the healthcare space more aggressively, according to LEK. The areas Amazon can potentially disrupt range from medical supplies, to retail pharmacy, to telemedicine and AI diagnostics.

Amazon is already selling a wide range of medical supplies and durable medical equipment (DME) to consumers, but with its market-leading logistics capabilities and its B2B ecommerce platforms, wholesale distribution is the next step. With its Amazon Business Professional Healthcare program – already licensed in 43 states – licensed professionals from health organizations can order restricted-access products. This has the potential to disrupt the current group purchasing organization (GPO) contracting model, and OEMs are already starting to sell some of their equipment directly without sales reps.

Amazon also looks set to take on mail-order pharmacies, having already secured wholesale distribution approval from 12 state pharmaceutical boards. The e-retailer can use Whole Foods locations to house pharmacies for local pick-up powered by their mail-order drug service. In terms of mail order, Prime Now is edging towards two hour delivery times, putting pressure on existing mail-order pharmacies. Amazon’s ability to deliver lower costs, will likewise put pressure on retail pharmacies to expand services – including blood checks, for example.

Amazon could also move into pharmacy benefit management (PBM), which lowers prices through the combined purchasing power of health plan members. Amazon would likely partner with a large existing player (or purchase a smaller one), giving it access to claims adjudication systems and pharmacy networks. The company’s relationship with Prime members and its data analytics capabilities would make it an attractive partner for a PBM.

Amazon’s potential entry-points into the healthcare market

The e-retailer is more than a quick and cheap deliverer of goods in cardboard boxes. At its heart, the firm is a tech company, having sold more than 20 million Alexa AI-powered Echo speakers in the US alone. According to the report, the speakers and other Amazon AI-capable devices could serve as the basis for telemedicine healthcare services. Echo Show, which incorporates a screen, could facilitate video telemedicine consultations with physicians. A further step would be to enable in-home visits from healthcare providers through the Amazon system – applying downward pressure on the price of common GP visits and walk-in clinic trips.

Amazon’s AI capabilities may also be used to provide healthcare diagnostics to consumers in the future. Indeed, the Mayo Clinic has already implemented Alexa’s ability to provide first-aid information and voice-driven self-care instructions. Through the use of machine learning, Echo could be turned into a home diagnostic tool, potentially removing a huge volume of doctors visits. This would obviously face huge regulatory hurdles and pushback from physicians’ associations, but the potential is there – if AI doctors become better at basic diagnoses than the average human doctor.

From the easier point of selling medical supplies and distributing drugs, to the more difficult area of replacing the functions of human physicians, Amazon has the potential to upset the US healthcare landscape. With Berkshire Hathaway head (and investment demi-god) Warren Buffett calling rising healthcare costs ‘a tape worm’ on US businesses and competitiveness, the incentive for Amazon and its partners to effect a sea change in the area is strong.

And aside from the expert management consultants at LEK, healthcare insiders also believe that Amazon will be successful in their foray into the healthcare market. In a recent survey from Utah-based Reaction Data, it was found that 75% of respondents in the industry expect the e-retailer to be successful in its expansion into healthcare.


North Highland welcomes Amy Andersen as its healthcare leader

25 March 2019

Management consulting firm North Highland has hired Amy Andersen as a vice president and leader of its healthcare consulting segment. Andersen has more than 20 years of healthcare industry experience. She will be based out of the firm’s San Francisco office.

In her new role, Andersen will help clients navigate the changing healthcare landscape while developing strategies that drive value, quality, access, and efficiency.

Andersen has supported an array of healthcare and technology clients in the areas of strategy, innovation, mergers and acquisitions, and transformation. She has deep expertise in value-based care, physician engagement, provider contracting, regulatory compliance and policy, data and analytics, and quality and payment metrics.

Before joining North Highland, she founded and led Andersen Health Advisors, serving as a principal strategy advisor to Stanford University's Clinical Excellence Research Center. Before that, she spent two years as an executive partner and healthcare provider lead partner at IBM, where she created and led go-to-market strategy for the tech giant’s North American healthcare provider business.

North Highland welcomes Amy Andersen as its healthcare leader

Andersen was also a VP and partner at Philips, leading the development of a patient-centered enterprise care management redesign solution and achieving a threefold increase in the pipeline of the firm’s federal and state healthcare service line.

She additionally spent nearly two years at Booz Allen Hamilton, where she served as practice leader of the healthcare payor and provider consulting offering. In the role, she crafted the practice’s overall strategy, while working on major projects like a $30 million advisory engagement to a premier State Health Insurance Exchange under the Affordable Care Act.

"Amy is a skilled healthcare leader with experience advising high growth health and global technology companies," John Norkus, managing director of North Highland, said. "She is an industry thought leader and subject matter expert that motivates teams to build partnerships and execute strategic growth."

Related: North Highland elects CEO Dan Reardon as chairman of the board