Amazon (AMZN) announced on Thursday that it has reached an agreement to buy primary healthcare provider One Medical for an estimated $3.9 billion in cash.
Customers of One Medical, a primary care service with a subscription model, are promised “24/7 access to virtual treatment.” According to the company’s website, it partners with over 8,000 employers to provide One Medical health benefits to their employees in a dozen major US areas.
The e-commerce behemoth believes “health care is high on the list of experiences that need reinvention,” according to Neil Lindsay, senior vice president of Amazon Health Services, in a statement announcing the acquisition on Thursday. Amazon wants to be one of the businesses that “dramatically improves the healthcare experience over the next several years,” Lindsay said.
The acquisition is merely the most recent instance of the digital behemoth, increasing its presence in the healthcare sector. Amazon purchased the online pharmacy PillPack in 2018 and subsequently introduced its digital pharmacy in the US. Separately, Amazon joined forces with JP Morgan Chase and Berkshire Hathaway in an endeavor to offer better health care services and insurance to employees and families at the three companies at a reduced cost, as well as perhaps to other businesses. Last year, the Haven project came to an end.
In recent years, Amazon has expanded its empire beyond online retail to include entertainment, groceries, and other services, greatly expanding its influence over consumers’ lives. One Medical would be one of Amazon’s biggest-ever acquisitions. In 2017, Amazon agreed to pay $13.7 billion for the food company Whole Foods, and earlier this year, it completed an $8.5 billion acquisition of legendary Hollywood film studio MGM.
According to a note written by Evercore ISI analyst Elizabeth Anderson on Thursday morning, Amazon would gain access to physical health clinics through the One Medical transaction as well as “payer and hospital system partnerships.”
One Medical, a San Francisco-based company, has witnessed an increase in demand for its services as a result of the Covid-19 outbreak and the development of the telehealth industry in recent years. One Medical stated in its most recent quarterly earnings report that it had 767,000 members overall, a 28 percent increase from the previous year. In January 2020, One Medical went public.
Following the announcement, shares of 1life Healthcare (ONEM), the parent company of One Medical, increased by more than 65 percent in early trade on Thursday. On Thursday, Amazon’s shares opened largely unchanged. Following the news, shares of CVS Health Corp. and Walgreens Boots Alliance fell somewhat on Thursday morning.
The transaction is still pending shareholder and regulatory approval from One Medical.
Nicholas Economides, an economics professor at the Stern School of Business at New York University, expressed skepticism about how much formal antitrust investigation the acquisition may face. He contrasted the acquisition of One Medical to Amazon’s earlier purchase of Whole Foods, noting that at the time of the purchases, Amazon’s market share in each industry was quite modest. Antitrust authorities have historically thoroughly investigated mergers that would drive out a rival from the same market, but they have seldom objected to agreements when one corporation buys its way into a related industry.
Because Amazon is a marketplace for the sale of food, it was a minor competitor of Whole Foods before the merger, thus the grounds for intervention are even less in this case than they were with Whole Foods, according to Economides.
I don’t see Amazon having a sizable healthcare business here.
However, several opponents of the tech sector were quick to voice their worries about the agreement and the data that the corporation may access.
According to Sacha Haworth, executive director of the Tech Oversight Project advocacy group, “Amazon having back door access to private health care data is frankly a terrifying thought and calls into focus how desperately Congress needs to pass antitrust reform to prevent these tech giants from abusing their monopoly power.”
The announcement of Amazon’s latest deal comes as officials at the Federal Trade Commission, the Justice Department, and Congress have sounded a tougher note on large tech platforms and vowed to get more inventive — and aggressive — about enforcing competition law. Even so, the deal may not raise any red flags under a traditional antitrust framework. A bill that some of US senators are frantically trying to get passed may put additional boundaries between the various business lines of internet companies, preventing them from exploiting their enormous scale in many industries as a kind of force multiplier, which some claim hurts competition.