Amazon’s Move into Healthcare: Managing Tail Spend or Redefining its Last Mile?


Everyone is consumed with Amazon’s widely reported “move” into healthcare. But what does that mean? While the prevailing wisdom suggests that Amazon has an opportunity to displace the group purchasing organizations (GPOs) and major distributors that dominate care provider supply chains, even if that’s true, is that Amazon’s endgame — managing healthcare’s tail spend?

"I get asked all the time what Amazon is doing," said Tom Rodgers, managing director of McKesson Ventures, one of those distribution giants that industry analysts believe is poised for disruption. "It's a low-level paranoia that Amazon will drive down profitability,” Rodgers said.

Selling commodity and low-level preference items to a consolidating market of behemoths seems shortsighted, if not beneath Amazon’s mantle.

For starters, many of Amazon’s largest potential customer targets are already contracting with manufacturers on a direct basis. Second, they’re taking ownership of their inbound logistics. Third, they’ve already implemented “Amazon-like” marketplace solutions that address a far broader range of product categories and are heavily customized to the unique needs of care providers. Anyway, on a far more controlled basis, these same systems are capable of punching-out to Amazon as a supplier — when it makes sense.

Logically, wouldn’t Amazon have its eyes on a bigger prize? Think patient care logistics (e.g., telemedicine, remote care fulfillment), leading to pharmaceutical distribution and, finally, broad-based medication management. Good thoughts, because the standards/regulatory burdens, data integration and customer fulfillment challenges fit squarely into Amazon’s wheelhouse.

"I would expect a marketplace of sorts for consumers to choose a doctor or service, and schedule it," Rogers said. The companies that would be threatened — or potentially bolstered through M&A or partnerships with Amazon — are early stage and include consumer health tools like Zocdoc and Castlight.

In other words, leveraging its vaunted logistics know-how, secure data storage and application hosting capacities, Amazon could help redefine remote patient fulfillment. While the care-continuum is fragmenting, that last mile still leads to the patient’s home. It’s a bogey worthy of its capabilities and, frankly, more up its alley than trying to integrate shopping carts into clinical workflows. Telemedicine and the execution of other remote monitoring-based care protocols have been in dire need of a benefactor. Amazon may just be the strategic owner they’ve been waiting for.

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