Amazon and Walmart wade into U.S. telehealth and digital pharmacy

The ecommerce giants evolving healthcare offerings could put pressure on drug makers, as well as PBMs and telehealth vendors

Amazon’s healthcare ambitions have long been the subject of intense speculation – and not a little anxiety – for players throughout the sectorAmazon’s massive scale and world-beating digital capabilities give it the power to disrupt nearly any business it enters. So you could almost hear healthcare company CEOs taking a sharp breath and sitting up little straighter when, in March, Amazon announced that it would offer its in-house health plan, Amazon Care, to other employers in the United States. 

Amazon’s pitch to self-insured employers is that they will provide patient-centered, digitally-enabled online-and-in-person care that delivers greater convenience and a better customer experience to their employees – along with cost savings over traditional plans. “What if there were no more waiting rooms,” a video promo directed at employers asks. “What if care was delivered on your time and your terms?”  

Behind these questions is comprehensive new offering including: 

  • 24-hour, on-demand access to clinicians through the Amazon Care app;  
  • at-home visits by nurses in Amazon-branded polos for labs, tests and treatments; and  
  • digital pharmacy services through the company’s Amazon Pharmacy business (built in part on its acquisition of PillPack) 

Amazon is still building out its clinical care network – a partnership with Crossover Health gives enrollees access to 17 sites in six states, including bellwethers CaliforniaTexas and New York – but will offer virtual services nationwide.  

“Amazon is in the initial stages of building out its virtual care offering,” said Indu Pillai, Principal Analyst for Market Access at Clarivate, “providing its employees virtual care with subsidized rates. It’s early to speculate, but with its innovative capabilities and focus on the consumer experience, Amazon could become a major contender in the telehealth space.” 

Walmart, meanwhile, has been gradually building out its network of in-store clinics – a bricks-and-mortar presence that will be complemented by the retail behemoth’s May acquisition of MeMD, which offers virtual urgent care and mental health services for a flat fee per visit 

 

“It’s early to speculate, but with its innovative capabilities and focus on the consumer experience, Amazon could become a major contender in the telehealth space.”

Indu Pillai, Principal Analyst for Market Access at Clarivate

Putting pharmas, PBMs under pressure

These announcements pose aimmediate challenge to the burgeoning field of telehealth services such as Teladoc and American Well, but over time, Amazon’s algorithmically-driven e-commerce engine could also pinch pharmacy benefit managers (PBMs) and pharmas.  

“Amazon has the capability to completely remove the PBMs from the process,” said Pillai. “That could mean that pharma companies become more commoditized, with price negotiations for drugs being more like a reverse auction.”  

Amazon could also cut out PBMs and compete directly with pharmas if it were to launch its own line of generic prescription drugs – the company has already launched a line of own-brand OTC products under the Basic Care labelHowever, Amazon still has some work to do in building out its specialty pharmacy capacity (Walmart has a head start in the pharmacy department, with a massive retail footprint, a sophisticated online operation and a partnership with CVS’s PBM) 

Amazon has other irons in the healthcare fire, as well, including its Halo fitness tracker, its HIPAA-compliant Alexa voice AI and its HealthLake cloud-based health data serviceThe company is exploring development of automated patient services, such as its Alexa Care Hub for seniors, fueled by (and generating) patient data 

 

The online retail experience meets medicine

Beyond its sheer scale and the awesome data analytics power of Amazon Web Services, what sets the company apart is its skill in designing the customer experience. How would the one-click ethos change patient behavior when it comes to treatment selection?  

“Right now, our physician research shows that around a quarter of patients in the United States ask their doctor about a specific drug,” said Sonam Dubey, Vice President for Digital Engagement at Clarivate (DRG, 2020). That’s true for both in-person consultations, where physicians tell us 25% of their patients ask about a drug, on average, and in virtual consults, where 23% do so. The Amazon experience really empowers the end consumer to shop around, and patients might start to act more like consumers in that environment.”  

Combined with a hybridized online-offline care modelthat could mean that physicians are disintermediated from the treatment selection process, to a degree, making strong patient education and support offerings all the more important for pharmas.   

This sort of hybrid online/offline service could have salutary effects for medication adherence – a 2018 Clarivate survey of U.S. patients found that 34% of non-adherent patients would be more likely to get prescriptions refilled using a service that offered online ordering and home deliverycompared to 25% of adherent patients (DRG, 2018)Moreover, 21% of non-adherent patients said they would order prescription drugs online if they could do it on Amazon.com, versus 14% of adherent patients.   

 

Stronger supply chains needed

COVID-19 has exposed frailties in global supply chains, particularly for pharmaceuticals, as evidenced by a plague of drug shortages in the early months of the pandemic. Amazon’s best-in-class procurement system could test how well pharmas have responded.  

“Pharmas would have to work on their supply chain strategies, because Amazon is very demanding,” said Pillai. 

It’s possible, of course, that Amazon Care will not be able to scale up. The platform has only one outside customer so far, in Peloton subsidiary Precor, which signed up earlier in MayThere’s plenty of competition in the self-insured employer marketplace, including Centivo’s recently-launched digital-forward offering, which has found traction in the Northeast and Upper Midwest. Haven, an earlier Amazon healthcare collaboration with J. P. Morgan Chase and Berkshire Hathaway, called it quits in January (though not without producing some learnings that have informed Amazon Care).  

Walmart has a way to go with its in-store clinic network, so far largely concentrated in Georgia and Florida, but its direct-to-consumer, flat-fee service model could hold particular appeal to the millions of uninsured and underinsured Americans, whose ranks have grown with the economic dislocation of the COVID-19 pandemic (Walmart is also making a play for seniors with a tranche of Medicare insurance plans).   

Both companies face distinct challenges, but if any have the scale and digital expertise to disrupt American healthcare, it’s them, and that has the attention of all of the healthcare industries 

Clarivate analysts track emerging trends in healthcare technology and market access, along with their impact on patient and provider behavior, in order to help life science partners speed treatments to market and meet patient unmet needs. Visit the CortellisLife Sciences and Healthcare blog for more expert analysis of this and other topics of concern to life sciences companies.