Amazon.com, Inc. (NASDAQ:AMZN) is getting into healthcare, and it could be the biggest revolution at the firm since the invention of Prime. According to a new report from investment bank Goldman Sachs, the move could be good for both consumers and those with Amazon stock.
According to the report, Jeff Bezos and his team have untold opportunities in the pharma sector. The healthcare push may even be able to expand beyond that into hardware and more. The industry makes up about a sixth of the US economy. It’s desperately in need of innovation and it’s growing quickly. That makes it seem like a perfect target for Amazon.
The most interesting report, however, says that Jeff Bezos has a secret healthcare team called “Project 1492” working on changing the world of medicine. The research group is apparently looking for telemedicine and other electronic health care solutions.
Here’s what Amazon.com, Inc. is trying
Goldman says that Amazon.com, Inc. (NASDAQ:AMZN) could attack the healthcare problem along multiple fronts. The first step, says the bank, would be to set up a quasi-pharmacy through a benefits manager. That would allow it to sell medicines without needing to go straight to customers.
The next opportunity is in service provision. Amazon could transform medicine sales with its central philosophy. This would, says Goldman, result in faster delivery and greater price transparency.
Eventually the firm could become a wholesale and retail drug-seller. This would allow it to take orders and fulfill them in a similar way to its current online store. This is likely the toughest and most dangerous move the firm could make. Upending competition among pharmacies could drive some out of business. This could result in poorer provision for older non internet-savvy people.
Finally, Goldman reckons that Alexa and other Amazon.com, Inc. (NASDAQ:AMZN) hardware could be used in care settings. This seems more of a reach, at least for the time being. The firm isn’t the only one looking at selling hardware to hospitals.
Apple, Alphabet also making healthcare moves
With the creation of the Apple Watch and HealthKit, it has been assumed that Apple Inc. (NASDAQ:AAPL) is aiming at healthcare. Unfortunately for the firm, it seems to be more difficult than simply selling a heart rate sensor. There’s a team currently working on healthcare applications at Cupertino, but we have yet to see real results.
One area it’s rumored to be interested in is electronic medical records. That’s an increasingly important part of the hospital environment. It’s not an easy world, however, to break into. It’s surrounded by regulatory nightmares, and Apple doesn’t seem to have made the effort just yet.
Alphabet Inc, another of Silicon Valley’s do-everthing companies, is also looking to healthcare. The firm’s focus is different than that of Apple or Amazon, however. It’s not trying to work with hospitals or sell pharmaceuticals. Instead Alphabet thinks it can find the next great health solutions through research.
The firm was reportedly close to bringing a contact lens diabetes monitor to market. That project appears to be facing serious delays at this stage, however. Through Verily Life Sciences, it’s is still looking for big solutions, however.
Can technology improve US healthcare?
The big problem in the US healthcare industry is cost. Despite having massive government investment and private spending, healthcare in the US is worse than in the rest of the developed world. Spending more to get less isn’t anybody’s idea of a good deal, but can the tech world really help?
If Amazon.com, Inc. has a talent for anything, it’s lowering consumer prices. The firm’s brutal competition has been so effective that it has even been blamed for the record lows in inflation in recent years.
Other types of tech solutions, such as the proposed Apple Inc. (NASDAQ:AAPL) electronic records, could reduce overhead. There is absolutely the opportunity for tech firms to improve healthcare. The problem is, however, that the system is so broken that these solutions won’t go far enough.
Other developed countries have far superior healthcare, without needing Amazon to run it for them, and the structure of the highly regulated market place is what’s standing in the way of making care more affordable for all in American society.
That’s a problem for policy makers, however. As recent political efforts have shown, overhauling the entire system isn’t easy, and it takes hard work and dedication to get there. What investors should be worried about is whether this is good for Amazon stock.
Amazon keeps expanding
This isn’t the first new market that Amazon.com, Inc. (NASDAQ:AMZN) has threatened to break into this year. In truth it’s not even the fifth. The firm’s growth has become even more virulent with each passing year. That brings both benefits and costs for Amazon stock.
Healthcare is a sensitive issue for people, and the firm could suffer a backlash if it jumps into the market. If the firm’s pharmacy plans, for example, disproportionately take young customers away from brick and mortar stores, it may end closing some down. That’s a move that would disproportionately affect the healthcare of the old.
At the same time, politicians appear to be sniffing around Amazon.com, Inc. (NASDAQ:AMZN). The firm is now regularly being accused of being a monopoly, or abusing market power. There’s also a growing academic literature that suggests a redefinition of abuse in competition law.
Government interference in Amazon business becomes a whole lot more likely if the firm enters into the healthcare market. There’s not much to argue with there. Veteran investor Doug Kass says, based on sources in Washington, that there is already talk about bringing a case against the firm.
If Amazon breaks into the healthcare market, it could be a massive opportunity for growth. Given the changing attitudes of regulators, though, it may also turn out to be an example of Icarus flying too close to the sun.