Amazon (NYSE: AMZN) is entering the health care market, and its momentum could carry the retail giant into the home care space.
Watching Amazon’s actions and guessing at next steps has become a spectator sport, and as the home health care space is in the midst of a major consolidation period, industry players are looking for opportunities to both benefit from Amazon and defend from potential competition.
Health care entry
It’s the ability to bring a better experience to customers that has driven Amazon’s big moves in retail, including its recent acquisition of Whole Foods, and will continue to motivate the company if it enters the health care space. That’s according to Brittain Ladd, an independent supply chain consultant and former Amazon employee. Ladd formerly worked on Amazon’s grocery distribution chain and is not involved in Amazon’s current activity.
“Amazon is taking a look at the entire grocery industry and saying, ‘What can we do to provide a better customer experience?’” he told HHCN. “[They] started with online and now they have stores, but Amazon will always be asking, ‘What else can we do?’ That can be applied to the health care and pharmacy industry. They may start small, but make no mistake, they will be asking what else can we do, and how.”
Health care stakeholders got their first glimpse at Amazon’s discreet movement into the industry when it was uncovered the retail giant had acquired wholesale pharmacy licenses in at least 12 states, the St. Louis Post-Dispatch reported in October 2017. However, the extent of Amazon’s plans, whether in pharmacy or health care more broadly, remain unclear. Amazon did not respond to multiple media inquiries from Home Health Care News for this article.
Amazon has taken certain steps, though: It also quietly added to its growing label of private label drugs to include over-the-counter drugs with “Basic Care,” a newly-launched product line that is a registered trademark of manufacturer Perrigo (NYSE: PRGO), according to a December research note from Raymond James. Perrigo has been selling its OTC drug on Amazon for years under its “Good Sense” label, and a sample set of the Basic Care products reveals the products are cheaper, much cheaper in some cases, than at competitors like CVS Health (NYSE: CVS), Raymond James stated. Though the financial services company isn’t ringing any alarm bells for its “Sky is Falling Freakout-o-meter,” the move marks an increasing competitive threat for existing pharma players, according to the note.
Others are also certain that Amazon will enter health care generally through pharmacy, potentially by acquiring a pharmacy benefit management (PBM) company, or a third-party administrator of prescription drug plans. Amazon “will almost certainly enter the drug distribution value chain within two years,” a Leerink Partners research note dated October 6, 2017, predicted.
Major players with community-based services have recently made moves that are apparently motivated, in part, by the need to defend against Amazon. CVS recently announced it was acquiring health insurance giant Aetna (NYSE: AET) in a $69 billion deal. The transaction essentially shuts out Amazon from Aetna customers if it were to become a pharmacy provider, and also solidifies that CVS and Aetna will expand home- and community-based services.
If Amazon were to become a full service PBM, as expected, the impact on home health care wouldn’t be much, though some providers could see it as another opportunity to offer better services and lower prices for clients.
“I don’t think they would impact us,” Mike Magid, COO of home care provider Griswold Home Care, said of the potential pharma entry. “If anything, if they got into pharma, it would be another avenue we could explore from a pricing point. Our goal as a home care company is to keep programs in front of clients and caregivers that are free or extremely affordable.”
Home health worries
As Amazon looks to possibly capture some of the market share in the pharmacy space, home care providers are keeping watch on the company for other reasons.
Coupled with its home-based voice technology, Amazon’s Echo product could easily be paired with home health and home care services to fulfill a number of responsibilities for seniors needing care. And some home care and home health providers are already actively exploring these options, including California-based Libertana Home Health, which tapped Amazon’s Alexa for a pilot study with some of its clients.
“When it comes to home health, I don’t see Amazon employing health aides in the home,” Scott Barclay, partner and leader of the computational care practice at Data Collective, an early stage deep tech venture capital firm, told HHCN. “That said, I do think the home health agency model, which is broken, is ripe for further innovation (like Honor, like Carelinx), and I think the proliferation of Amazon’s Alexa- and Google Home-type audio devices will further accelerate new and seamless Uber-like ordering of services for people aging in place. So, these trends are impactful even if Amazon does not per se go after home health or senior care.”
As far as providing services, Amazon already directly offers home cleaning services from its website, and other services aren’t far behind. While Barclay disagrees, some do see Amazon going even further in the future and possibly entering home care directly.
“I absolutely think it’s a possibility,” Ladd said. “What you would have to look at is what is a sweet spot of Amazon – the ability to meet the needs of customers in their home, the last mile capability. A customer they can deliver to at home.”
In addition, an Amazon employee in the company’s “general and non-acute health care division” was recently registered to attend the National Association for Home Care & Hospice (NAHC) annual conference in Fall 2017.
Not everyone thinks Amazon is up to becoming a provider, or even a platform for home care services. Instead, Amazon is more likely to stick to the retail side of health care, rather than services.
“I’m not concerned about the [health of the] home health industry or [Amazon] getting into the temporary labor space,” Paul Kusserow, CEO of Baton Rouge-based Amedisys (Nasdaq: AMED), told HHCN. “They’ve stayed away from that in the past. We’ve seen them look at this before, but they stay very very much to inert products, pills, anything in the mail to be boxed and shipped. They do a really good job and are efficient at it.”
Even if home health care providers are not directly challenged by Amazon entering health care, the indirect implications could still be there, as providers, distributors and other stakeholders mobilize to prepare for – or keep up with – Amazon. The competition Amazon would create by entering health care in a significant way could cause pain for some established players, but it could also spur a new wave of innovation.
“By reputation and by proof and past track record, Amazon does a great job when they enter a new industry,” Ladd said. “There’s nothing wrong with that – competition is a good thing and that’s what health care will do. Amazon will challenge everyone else. …It’s good for customers and good for the entire industry.”
Written by Amy Baxter