Revisiting Amazon’s Foray into Health Care

By Dean Celia, Contributing Writer

In 2017, First Report Managed Care asked a team of experts to analyze Silicon Valley’s foray into the health care space. Four of them offered their take where Amazon might fit in. Since then, the tech giant has been busy acquiring, partnering, and developing, its eye on a share of the $3.2 trillion heath care market.  In June 2018 it spent $1 billion to acquire the online pharmacy PillPack.com.  It has also struck a deal to embed technology into electronic medical records (EMRs) that directs patients to Amazon.com to purchase blood pressure cuffs, glucose monitors, and other durable medical equipment. And in November 2018, Amazon announced plans to sell software that will mine EMRs for information that it says will help clinicians improve care and better manage costs.

With the flurry of activity, we asked those four experts to analyze the moves and offer their thoughts on what may be next. Our panelists include:

• Charles Karnack, PharmD, BCNSP, assistant professor of clinical pharmacy at Duquesne University, Pittsburgh
• Arthur Shinn, PharmD, president, Managed Pharmacy Consultants, Palm City, FL
• Norm Smith, principle payer market research consultant, Philadelphia
• F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare, Greenville, SC

Amazon says PillPack—which sorts medication by dose and ships it to patients--is in a business it can build up quickly. Do you agree?

Dr Vogenberg: Yes, but keep in mind that it is a subset of the broader retail market, so the growth will be marginal, not dramatic.  Akin to the long-term care business over the last 20 years, it ebbs and flows but today is driven by reimbursement rules that don’t follow traditional market trends.

Dr Karnack: PillPack’s personalized approach has appeal, but I agree the growth will not be dramatic. Many prescription plans have preferred pharmacies that currently do not include PillPack    It may require developing innovative pricing and creative negotiation with payers.

Mr Smith: They can only build it up if insurers are willing to allow PillPack to be an approved network provider. Keep in mind that it is unlikely to be the low-cost provider of pharmacy services. I wonder if PillPack has data that shows its customers have better outcomes than others who shop at retail pharmacies?

Dr Shinn: A good gauge of PillPack’s potential growth is CVS/Caremark’s Multi-Dose Pack business, which is pretty much the same type of offering. CVS/Caremark does not see a huge demand for the service, but they use it as a competitive offering. Based on that, PillPack does not appear to be a huge business on its own. The big win for Amazon is that PillPack has licenses in all US states except Hawaii. That gives Amazon regulatory approval to ship medications.

Amazon has also been gradually gaining approval from many state pharmacy boards to be a wholesale distributor. What do you think that says about its intentions? 

Mr Smith: Quite obviously, it's the first step in gaining a slice of prescription drug revenue pie. I could see Amazon becoming an important provider of physician supply services, a very disaggregated industry.

Dr Vogenberg: There was a time when prescription drug wholesalers might have considered themselves an acquisition target of Amazon, but that is very unlikely now. Wholesalers will have to rapidly diversify and develop a more valuable business proposition to survive.

In our 2017 analysis of Amazon, some thought an alliance with a pharmacy benefits manager (PBM) was a logical step.  Do you think that’s still a possibility?  

Dr Vogenberg: For what?  Why would they partner with a PBM and what would they partner about?  PBMs are in a retrenchment mode themselves and defensive after the two big vertical mergers there is little bandwidth to address Amazon proactively.

Mr Smith: I could see them creating alliances with all PBMs, providing a distribution system, while PBMs provide the intellectual capital to manage the drug benefit.

Dr Shinn: Amazon no longer needs the PBMs to ship pharmaceuticals, since those licenses were part of the PillPack acquisition. But what it does need is specialty pharmacy. There are certainly enough specialty pharmacies out for Amazon to acquire. A specialty pharmacy like Diplomat comes to mind. I agree that it probably won’t acquire or partner with one of the larger PBMs. They are more likely to affiliate with a smaller PBM that has a specialty pharmacy, or, as mentioned, acquire a smaller specialty outfit and develop PBM capabilities overnight.

Amazon’s reach into the medical equipment space makes a lot of sense, given its model that facilitates ease of purchasing and delivery to the home. Do you think they are gunning for the retail pharmacies? 

Mr Smith: Amazon wants to be in the physician supply business, an area with lower barriers to entry.

Dr Vogenberg: Yes, it is an easy and reliable line of business offered to a nicely growing demographic that can also allow them more growth over time into other lines of business.

Dr Karnack: Right. I almost see using things like blood pressure cuffs and glucose monitors as an enticement to get patients to purchase other items such as over-the-counter drugs, health and beauty aids, and, ultimately, to have their prescriptions filled by Amazon. It sure sounds like a direct challenge to retail chain pharmacies. Depending on how innovative the business model is, particularly with younger consumers, it may very well succeed. 

Amazon’s plans to sell software that mines patient medical records for hospitals and providers sounds fascinating and concerning at the same time. What are your thoughts?

Dr Shinn: I am surprised that they have the capability to decipher the details from patient records.  I review medical records as part of work we do with a medical audit company. I find it a major challenge. Certain abbreviations are used that mean something to a particular practitioner but nothing to the rest of us. The records aren't totally filled out they're not necessarily chronologically based. If Amazon has the technology to overcome these obstacles, I am very impressed.  [Amazon says it has used so-called “deep learning” to recognize the various ways clinicians could enter notes.]

Dr Karnack: I am concerned about the ethics of using software for this purpose. And to sell medical equipment. Amazon’s traditional business involves voluntary searches and online purchases. But here, patients have no control over physician documentation in progress notes and consults in the EMR.  It sounds like a slippery slope that pushes the limits of HIPPA patient confidentiality.

Dr Vogenberg: The Amazon plan begins to slowly become public and illustrates how broad and deep it can go into the health care marketplace. A little scary for some and exciting for others.

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