7 minutes to read With insights from... Dr. Stefan Weiß, MBA Principle Business Consultant stefan.weiss@zuehlke.com Amazon invests strongly in data-driven healthcare solutions – from Alexa’s digital health assistance to own hospitals. Pharma’s distribution channels and payers health insurance models are strongly at risk for disruption. Established players need to adapt their core business quickly to digital services and associated business models Update November 2020: Amazon announced its move in the prescription drug space in the USA with a two-day delivery service for Prime members. Share prices of traditional US pharmacies significantly drop. (CNBC Article) Since 2016, Jeff Bezos pushes Amazon’s expansion machinery towards the healthcare market – by developing data-driven medical solutions, hiring top pharma managers and acquiring healthcare startups. In this article, we will outline four key areas which are attacked by Amazon to establish an independent, fully integrated health platform throughout the healthcare system – from Alexa becoming a virtual physician to Amazon hospitals, from a worldwide online pharmacy to offering own health insurances. Amazon’s Alexa – a virtual physician at home So far, Amazon’s digital assistant Alexa has mostly been used to play music, inform about the weather or to remind you of appointments. In the near future, however, this technology might cause a disruptive change in our daily lives by virtual disease detection, monitoring and consultation at home. Similar to a traditional conversation with your physician, Alexa will be able to identify diseases by asking health questions and analyzing your answers by AI-based natural language processing methods. One of the most successful players in this so called ‘symptom checker app’ space is the Berlin-based startup Ada Health. Importantly, a key investor of the company is William Tunstall-Pedoe, the AI entrepreneur behind Alexa. Currently, there is only an app version available, but the company teamed up with Amazon to integrate its solution in Alexa. In the future, diseases might even be diagnosed automatically by Alexa’s speech analysis, without answering questions. Such a method has been filed in a recent Amazon patent. The acquired data will be stored and analyzed on the market-leading cloud platform Amazon Web Services (AWS). One of the latest analysis services is „Amazon Comprehend Medical“. This cloud service structures and interprets medical data from different types of sources, including electronic health records and clinical trial reports. Soon, these analyses will be enriched by Alexa’s acquired medical data, which will lead to even more holistic and improved treatment plans. In addition to its impact on disease diagnosis, Alexa is also changing drug development by its application in clinical trials. For example, it has been used to motivate cancer patients to increase physical activity or to monitor food intake. By reporting the daily health status to Alexa, discussing treatment-associated issues with Alexa or being reminded to take your medicine, Alexa might strongly improve clinical trial outcomes and could therefore significantly reduce drug development costs. Amazon’s physicians and hospitals After Alexa’s algorithms suggested a disease diagnosis, the virtual assistant could automatically recommend drugs from the Amazon online pharmacy (see below) or could send the patient to an Amazon hospital. In summer 2018, Amazon’s plans to open own primary care health clinics got public. Amazon approaches this branch of the healthcare market in a pilot project with exclusive hospitals for its employees in its home tome Seattle. However, with Amazon’s resources, a fast expansion to a broader customer base can be expected. These hospitals will not be standard clinics as we know them today. Instead, Amazon will leverage its data driven technologies, e.g. by applying a new Amazons AWS cloud service called Amazon Neptune technology. This service allows an easy management of connected health datasets for faster application development. The official motivation of Amazon to establish own hospitals is to reduce costs of health care services. Apart from this honored aim, Amazon will gain highly valuable insights into the complex and regulated health clinics market. This know-how could then be easily scaled up allowing Amazon to become a leading hospital operator which offers innovative data-driven treatment options. Amazon’s online pharmacy Having confirmed Alexa’s disease diagnosis by an Amazon physician, patients can order its medication conveniently and for a competitive price on Amazon’s well-established online shop platform. Since 2018, it is possible to get pills sent home by the Pillpack service. In June 2018, Amazon declared its intention to become a major player in the healthcare market by acquiring this aforementioned startup for 1 billion dollars. The online pharmacy startup is specialized in delivering personally packaged medications to patients by mail. With this approach, Amazon not only gained access to about 40.000 patients, but also received the license to sell prescription drugs in 49 US states. The impact of this deal on established pharmacies was immense: Rite Aid, Walgreens and CVS Health lost about 11 billion dollars market value after the announcement. In addition, European pharmacies fear Amazon’s goal to become a leading online pharmacy. DocMorris’s mother “Zur Rose” reacted with acquisitions by itself, e.g. by acquiring Germany’s third biggest mail-order pharmacy Medpex. It will be interesting to see how established players will defend their market. Amazon has several competitive advantages, including its exceptional logistics capability (shipping), bulk purchasing power, and a transparent pricing model. With Amazon’s growing role as a key drug distribution channel, pharmaceutical manufacturers not only share sensitive sales numbers with Amazon, but are also charged for high rankings on search result pages of its website (Google’s business model). However, Amazon is not settling for its role as a sole market place. In early 2018, Amazon launched its own private labeled OTC line called Basic Care – manufactured by a third party called provider Perrigo. With Amazon’s access to customers, its scale and power over the future key distribution channel for drugs, Amazon will become a strong competitor not only for pharmacies but also for drug manufacturers. Amazon’s health insurance After ordering the medication on the Amazon online pharmacy, patients might soon get reimbursed directly by an own Amazon Health Insurance. In January 2018, Amazon announced a new but still unnamed joint venture together with Warren Buffett’s Berkshire Hathaway and JPMorgan. The company’s declared aim is to improve the quality of care and reduce health costs. It is expected that at least parts of the company will focus on establishing its own health insurance leveraging Amazons data driven technologies. To push forward, high-profile hires were made – including the former surgeon Atul Gawande, who will lead the company as CEO and Dana Gelb Safran, a former manager from a leading insurance company. In a first step, the new company plans to offer its service to more than 1.2 Million employees of its three partner companies – with further scale up yet to come. By running an own health insurance, Amazon gets access to millions of electronic health records which will be analyzed and interpreted by Amazon’s AWS cloud services. The accumulated data allows to offer competitive insurance conditions and therefore, to strongly compete with established insurance players. Amazon’s impact on the healthcare market Amazon is on the rise to become a global player on the healthcare market which disrupts the complex healthcare system on many different layers. Physicians have to fear the competition with Alexa’s home diagnosis systems while established hospitals and insurances are approached with own clinics and health insurances. Although Amazon does not seem to plan entering the core pharma business of developing own innovative drugs by heavy R&D efforts, it establishes tremendous power on drug makers by recommending (self-labeled) drugs and controlling their future distribution channel. Compared to the US, higher legal and regulatory hurdles in Europe might slow down Amazon’s goal to become a closed-loop healthcare provider. However, financial benefits generated through innovative and data-driven solutions will ask for changes in the healthcare market and will most likely lead to Amazon’s success in the long run. One of the key factors for Amazon’s expansion success to other industries is the excellent adaption of their core capabilities to collect, analyze and interpret data. Putting data at the center of a business allows the development of innovative products and services and opens the door for revolutionizing business models. What shall the existing players in the healthcare market do? Instead of watching tech giants pushing back healthcare companies to their minimal core business, the attacked players should think about how to benefit from the digitalization by digital businesses innovation leveraging their core competences. Because the past has shown that technological revolutions cannot be survived by waiting out. Contact person for Germany Dr. Stefan Weiß, MBA Principle Business Consultant Dr. Stefan Weiss is Principle Business Innovation Consultant at the Zühlke Group and has a broad background in Neuroscience combined with a profound expertise in economics and innovation management. Before joining Zühlke, Stefan shaped the future of Healthcare and Life Sciences at the Innovation Center of Merck KGaA. He is passionate about the digitalization of the Pharma- and MedTech Industry with innovative solutions and business models by applying his scientific and economic expertise. At Zühlke, he extends technical excellence with domain-specific insights and thereby strengthens the partnerships with Pharma- and MedTech customers Contact stefan.weiss@zuehlke.com +49 89 262 041 401 Your message to us You must have JavaScript enabled to use this form. First Name Surname Email Phone Message Send message Leave this field blank Your message to us Thank you for your message.
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