After it was rumored to be in play earlier this month, it shouldn’t come as a huge surprise that One Medical has found a new home. After a torrid public offering, the value of the American consumer healthcare and technology company had fallen below its IPO price, and it was an obvious target for the right buyer.
But after CVS left the table, it wasn’t a healthcare entity that snapped up the former venture darling, and nor was it turned into a platform play by private equity. Instead, Amazon nabbed it up in a deal that comes to around $3.9 billion. At $18 per share, One Medical is exiting the public markets with a price tag that’s higher than when it IPO’d — a win of sorts for the unprofitable company.
What should we make of the Amazon deal, though? We covered the news on TechCrunch, and TechCrunch+ dug around into what the smaller company could offer its new parent, so we’ve gathered to share a few more thoughts on the matter.
From Walter Thompson, Miranda Halpern and Alex Wilhelm, three views follow on the Amazon-One Medical transaction.
Walter Thompson: Amazon is the black hole created by the death of Main Street retail
One Medical’s CEO said his company’s acquisition by Amazon is “an opportunity to transform health care and improve outcomes.” But I interpreted the pending $3.9 billion purchase as a bright, blinking sign that the world’s largest retailer is not afraid of regulatory oversight or intervention. Amazon has moved beyond revenue generation: At this point, the company largely exists to accrete additional mass.
I don’t know if Amazon’s June 2017 purchase of Whole Foods created any efficiencies with regards to logistics, food waste or other industry metrics. As a consumer and former local reporter, however, I observed that the merger brought lower prices, greater convenience and fewer local grocery options.
In January 2018, a private equity fund that owned two natural-foods markets near me shuttered them both with little notice. My theory? Once my neighbors realized they could get kombucha and rainbow chard dropped off at their front door, all loyalty to the corner store evaporated.
There’s little to stop Amazon’s purchase of One Medical from proceeding: Regulators don’t get worked up over a major acquisition if the larger company is entering a new market. That’s why Amazon was able to snap up online pharmacy PillPack in 2018 and MGM Studios earlier this year. If Amazon set its sights on Walmart or CVS, that might ring some alarm bells inside Beltway agencies.
Amazon CEO Andy Jassy understands that creating monopolies is bad for business: It invites scrutiny, lawsuits and lots of bad press. Instead, he is building a cohort of enormous companies in separate verticals that, taken together, will touch nearly every aspect of commerce. In time, Amazon will be a thick layer of frosting spread over this cake we call America.
Healthcare accounts for a fifth of U.S. GDP, so the One Medical announcement may lift the market’s spirits before Amazon’s earnings announcement next week, which should likely reflect the fact that consumer spending has fallen in recent months. If patients can’t get a blood test while picking up a parcel at the same time a year from now, I’ll be surprised.
In space, black holes form after a star dies and collapses in on itself. In America, Amazon is the black hole created by the death of Main Street retail. If other verticals like education, construction or real estate fall into its gravity well, would anyone be surprised?
Miranda Halpern: Following a logical progression
Let’s do a quick timeline. Amazon entered the healthcare space in 2018 with its acquisition of PillPack, a medication delivery service. Since then:
- It launched Amazon Care, a virtual and in-person healthcare service for its employees around the Seattle area.
- Partnered with Crossover Health to build Neighborhood Health Centers near its fulfillment centers.
- Alexa was marketed to healthcare facilities as a way for patients to communicate with their families and medical providers.
- It launched Amazon Pharmacy, letting it offer an online and mobile ordering and fulfillment service.
- It launched Amazon HeathLake, a HIPAA-eligible service that can store and analyze patient information in AWS.
- In 2021, Amazon Care was expanded nationwide. The rollout process was for remote services to be offered to Amazon employees first, then to other companies.
The One Medical acquisition fits inside Amazon’s larger effort to expand its health offerings and to offer them to more people. With new patients comes new data. Data that, while constrained under certain regulations, could be used to improve recommendation algorithms and more.
As a 20-something, I can envision myself being helped by a system like One Medical. It’s a consistent healthcare product that stands out in America’s unpredictable, and often unavailable, system. Backed with Amazon’s cash, One Medical can scale and bring something better to more people.
As I think about the logic of the deal, it’s not hard to see how this company builds upon Amazon HealthLake. If Amazon uses this purchase as an opportunity to expand and build its own electronic medical records (EMR) or electronic health records (EHR) system, it certainly has the cloud service needed to power it.
The company has long crossed the physical-digital divide for both goods and services. Healthcare is simply another addition, and therefore one that makes good sense to me.
Alex Wilhelm: What happened to the value of focus?
Doing one thing and doing it well is a good way to build a startup. You know the cliche: Find an inefficiency (like a cohort of workers using Excel for a critical task), build a tool to tackle or combat the friction, and, voilà, you have a product that you can scale. The power of focus is one of the reasons why there’s a general guideline in tech circles against overfunding startups — too much capital can breed complacency or a lack of clear direction.
Yet, we may be seeing the opposite at big companies. After all, Amazon successfully pivoted from selling books online to selling everything online, building a cloud computing service, becoming a logistics leader with manufacturing might, and, recently, even launching an advertising business. That’s not to mention esports, livestreaming, consumer services like music and payments, and so much more.
And, now, it’s pushing deeper into healthcare. If Amazon was a startup, we’d fret that it was losing focus and, therefore, direction. That argument, however, doesn’t quite work for the big ones.
Why? Because Amazon is so large in its key markets that it is probably growth-constrained to the natural pace of expansion. Its TAM is now often set more by macroeconomic conditions, say, than its own efforts. That’s never the case for startups, so for smaller companies, sticking to their remit may be better advice than it is for the largest companies.
And, Amazon is not constrained by lack of capital. Between its wealth and its ability to raise effectively infinite funds through debt or share sales, it can afford to spend billions and try a lot of things to chase growth.
From this perspective, companies trade focus for TAM, and as they do so, they get farther and farther away from what they are best at. For Amazon, that’s digital commerce. How close is that to One Medical and the world of consumer healthcare delivery? Not very, but the two circles do overlap a little bit.
In Amazon’s defense, as far as TAM-hunting goes, the American healthcare market is an obvious choice. It’s immense. If Amazon can crack even a fraction of the health GDP of the United States, it is well on its way to securing future growth.
That said, there are reasons why the American healthcare system is so expensive: it’s inefficient in many ways, the incentives are shit and it is downright painful to navigate. Amazon itself learned this after its work with JPMorgan and Berkshire Hathaway failed to shake the system up. Now, armed with PillPack and One Medical, Amazon is going alone, with its checkbook at the ready.
You can argue that when companies reach a strong market share position in their core markets, they should probably not go after generational problems in hopes of finding growth. You could make the case that it’s a strategic error, or them being able to do it is a misapplication of antitrust provisions. Either way, Amazon is providing an experiment for us to watch, one that could inform us more quickly of what happens when a major tech company takes on an existing consumer market. Apple and cars will prove another.
In closing, I don’t want Amazon to do my healthcare. Not at all. The company’s treatment of people, given how it has handled unionization efforts amongst its staff, indicates that it is not a company that is people-first. Not exactly what you want from your doctor.