As Seattle-based tech giant Amazon.com Inc. (AMZN) demonstrates its capacity to enter and disrupt every market from food retail to cloud computing, the health care space is not free of danger. (See also: Amazon: 'Compounding Love of Prime Continues,' Says Street Bulls.)
After reports came out in May suggesting that the ecommerce giant was on the prowl for a general manager to lead a new pharmaceutical unit, Amazon has brought on a number of health experts in efforts to build out its public cloud platform, Amazon Web Services (AWS). Further, the online retailer has urged the industry to build applications for virtual assistant Alexa, while its online platform already sells medical supplies.
‘Partner of Choice’
While health care players are rightfully nervous, some industry executives such as McKesson Managing Director Tom Rodgers believe Amazon will not take on big distributors head on—at least not right away. “Everyone in the supply chain is nervous. It’s a low-level paranoia that Amazon will drive down profitability,” said Rodgers.
Rodgers foresees the U.S. tech giant aspiring to become a “partner of choice” to help customers navigate the health care space. “I would expect a marketplace of sorts for consumers to choose a doctor or service, and schedule it,” said Rodgers, suggesting that companies that would be negatively impacted or boosted through possible M&A and partnerships with Amazon are early stage and include consumer health tools such as Zocdoc, Castlight Health Inc. (CSLT) Teladoc and GoodRx. In the case that Amazon quietly carries out this strategy and builds up its internal tools, the company would gain access to a trove of health data, easily accessible in the cloud. This would allow the firm to enter other areas of health care including pharmaceutical distribution, says the McKesson exec.
"I wouldn't be surprised to see them partner with a pharmacy home delivery company first and let them deal with the regulation and operating burden," he said. "Only after they prove they can deliver demand, then (Amazon could) make their own investments." (See also: Amazon Could Buy Walgreens, Rite Aid, Express Scripts.)