‘Alexa, Buy Me a Bottle of Tylenol’: Amazon Enters Healthcare

President Trump’s tweets about Amazon being a monopoly with too much market power just may have a point. Not only has Amazon been in the news because of its purchase of Whole Foods (one of the largest supermarket chains in the country) and because of its generally massive and constant presence in e-commerce, Amazon is now entering into the healthcare market with a desire to revolutionize it. Amazon’s reported entrance alone into the healthcare industry caused healthcare stocks to fall and other players to forge new partnerships and mergers in preparation to be competitive against the e-commerce giant.

Certainly, Amazon’s goal of revolutionizing healthcare will be no small feat; it will require great innovation to alter a space that is so heavily regulated and controlled in relation to pricing. Even in the United States with a relatively privatized healthcare system, the government has a strong presence in the market because Medicare and Medicaid are the biggest single payers.

Also, competition from new conglomerates forming through mergers and collaborations between important players in the healthcare delivery space will challenge Amazon in its vision. Shortly after Amazon’s announcement, CVS Pharmacy began talks of an acquisition of Aetna, a health insurance company – often called insurers – while Walmart now wants to acquire Humana, another insurer. Some believe that CVS or Walmart with their huge brick-and-mortar presence and already-established brands in the pharmacy space will be even better poised than Amazon to revolutionize the industry. Furthermore, due to pressure from the Internet retailer, pharmacies like CVS and Walmart that have a current market presence are already reportedly looking into ways to expand by creating clinics and diagnostic centers in-house in order to provide more of a one-stop-shop service to clientele. These clinics should prove key in reducing expensive charges from unnecessary physician services. In this respect, Amazon’s lack of stores and buildings may be a detriment to a distribution system for this kind of service.

However, it is difficult to overestimate the potential of technology in general and Amazon’s expansive influence specifically to disrupt existing systems. How will Amazon disrupt this space in a unique way? Well, you know CVS and Walgreens as large pharmacy chains, which means they act as pharmacy benefit managers. Pharmacy benefit managers (PBMs) deal with claims processing between prescriptions given by doctors and their fulfillment by pharmacies. In many ways, PBMs act as middlemen in the healthcare delivery system. Much like how Amazon sought to remove the relationship between retailers and brick-and-mortar stores through its intermediary position as an immediate global retailer, Amazon has set its sight on removing PBMs, which are an unnecessary, additional layer between producer and consumer. Amazon has begun by getting licensing for the sale of medical devices and supplies and creating technological solutions designed to simplify and reduce costs in the health insurance space, as well.

With its technological prowess and sense for revolutionizing industries, Amazon may be able to apply its powerful voice recognition products like Alexa, ruthless cost-cutting measures, and widely used cloud computing infrastructure to improve efficiency and service in the healthcare space. Bringing these services to complement its existing medical equipment and supplies sales will be no small task and attract innumerable competitors; however, should Amazon pull this off, it may be able to change one of the most complacent industries and dominate one of the largest markets in the country and the world.