Amazon’s plan to buy One Medical raises concerns
The $3.9 billion acquisition would give the retailer a toehold in office-based and virtual care delivery. But competitive and privacy concerns abound.
Amazon’s recently announced plan acquire San Francisco-based One Medical for $3.9 billion is drawing opposition from some federal legislators as well as privacy groups, which have voiced concerns about how Amazon might access and use patients’ medical information.
The purchase, if approved by shareholders and federal regulators, would build on other moves the Seattle-based online retail giant has made to expand its presence in the healthcare market.
The deal would give Amazon access to years of longitudinal data from One Medical, which offers membership-based primary care services that emphasize the use of digital services. It operates 188 offices and has 767,000 members.
The deal
Under terms of the acquisition agreement, Amazon would acquire One Medical for $18 a share. The overall acquisition price of $3.9 billion also includes assuming One Medical’s net debt. “Completion of the transaction is subject to customary closing conditions, including approval by One Medical's shareholders and regulatory approval,” a recent joint announcement noted. “On completion, Amir Dan Rubin will remain as CEO of One Medical.”
The deal would rank as Amazon’s third largest acquisition, behind the June 2017 $13.7 billion purchase of Whole Foods Market and the May 2021 buy of Metro-Goldwyn-Mayer for $8.5 billion.
For Amazon, One Medical represents a jump-start into a novel consumer-facing approach to healthcare. One Medical uses a subscription model for care delivered online or in an office. The concierge-like approach promises same day or next day appointments, as well as longer meetings with clinicians and convenient services, such as the ability to receive drop-in lab services at its offices.
John Moore, CEO, Chillmark Research
“This acquisition will have a bigger impact on the business-to-business market than the business-to-consumer market.”
One Medical lost almost $91 million in its most recent quarter, ended March 31, although revenue reached $254 million, more than double the level in the year-ago period.
The healthcare provider accepts payments from a variety of insurers; it reports that about 50 percent of its revenue comes from services delivered to Medicare beneficiaries, according to its latest quarterly report. Last year, One Medical spent $2.1 billion to acquire Iora Health, which provides care for Medicare beneficiaries.
Other healthcare initiatives
The pending One Medical acquisition is the latest in a series of healthcare moves by Amazon.
In June 2018, Amazon acquired Pillpack for $839 million; that firm specializes in online ordering of pharmaceuticals and medical supplies.
Earlier this year, Amazon announced plans to expand its Amazon Care telehealth services line, which offered in-home visits by healthcare professionals in eight cities as of February, to 20 more cities this year. The hybrid program, which launched with a pilot project for Amazon employees in September 2019, gives Amazon the potential to tie care services to its Amazon Pharmacy and Pillpack mail-order business lines.
What’s Amazon’s long-term healthcare strategy?
The One Medical deal touched off a rash of speculation about how Amazon could further penetrate the healthcare market. The move seems to mirror Amazon’s other forays into the field, working off a common base of improving the consumer experience and facilitating transactions across a variety of care venues.
One Medical would give Amazon an entry point for interacting with care delivery systems, says John Moore of Chilmark Research.
“One Medical has built strong relationships with local health systems in markets it serves, as well as having some 8,000 employer clients,” Moore says. “So I take a contrarian view – this acquisition will have a bigger impact on the business-to-business market than the business-to-consumer market.”
Sen. Bernie Sanders, I-VT
"At a time of growing concentration of ownership, the Justice Department must deny Amazon's acquisition of One Medical."
Moore doesn’t see the Amazon acquisition as a competitive threat to Walmart, CVS and Walgreens, which are pursuing different strategies to provide care to consumers in retail settings. Most recently, CVS and Walgreens announced initiatives to facilitate patient involvement in clinical trials.
Moore expects Amazon to continue expansion into health services that target employers, rounding out the range of services it can put in front of large care purchasers. “Its next acquisition will in all likelihood be a virtual behavioral health services provider,” he predicts. “In the end, much like the platform Amazon built for online shopping, Amazon Health Services could also become a platform for employers.”
Amazon is well-positioned to meet consumer preferences in new markets, which is growing in importance in a post-pandemic world, says Sanjula Jain, senior vice president of market strategy and chief research officer at Trilliant Health, a market research and analytics firm. Shifts to telehealth underscore the potential for direct-to-consumer care, she noted in a recent blog.
Concerns about the deal
But some federal legislators as well as consumer advocacy groups have voiced serious concerns about Amazon’s plans to acquire One Medical.
Last week, Sen. Bernie Sanders, I-Vt., called for regulators to reject the proposed deal.
The American Economic Liberties Project
"Amazon has no business being a major player in the healthcare space."
"The function of a rational healthcare system is to provide quality care to all in a cost-effective way, not make billionaires like Jeff Bezos even richer," the senator wrote on social media, referring to Amazon's wealthy founder and executive chairman. "At a time of growing concentration of ownership, the Justice Department must deny Amazon's acquisition of One Medical."
The American Economic Liberties Project, a consumer advocacy group, also released a statement calling for the deal to be rejected.
“Allowing Amazon to control the healthcare data for another 700,000-plus individuals is terrifying,” says Krista Brown, a senior policy analyst at the American Economic Liberties Project. “Acquiring One Medical will entrench Amazon’s growing presence in the healthcare industry, undermining competition.”
The consumer advocacy group also contends the deal “will also pose serious risks to patients whose sensitive data will be captured by a firm whose own chief information security office once described access to customer data as ‘a free for all.’ Amazon has no business being a major player in the healthcare space, and regulators should block this $4 billion deal to ensure it does not become one.”
Sen. Amy Klobuchar, D-Minn., chair of the Senate Judiciary antitrust subcommittee, has asked the Federal Trade Commission to investigate the proposed acquisition.
"This proposed transaction raises questions about potential anticompetitive effects related to the pharmacy services business Amazon already owns and about preferencing vendors who offer other services through Amazon," Klobuchar wrote in her letter to the FTC.