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That’s why, when Amazon announced its plans to acquire One Medical last week, one of the questions that came to my mind was whether the tech giant’s entry into healthcare would pose a threat to healthtech startups, especially those delivering patient care.
Amazon’s ecommerce execution prowess has helped it edge out many competitors. Could it achieve the same feat in healthcare?
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“It all depends on how much they want to invest, but they could become a dominant player in primary care because they’ve got the convenience factor consumers want,” said Steve Tolle, a partner with healthcare-focused HLM Venture Partners.
However, the proposed takeover isn’t scaring investors in digital health companies. In fact, it’s quite the opposite—venture capitalists view this deal as a positive development.
“We think this is great news for the industry,” Deena Shakir, a partner at Lux Capital, wrote in an email. “It will push other large companies to partner with other major healthtech players in the space.”
Lux Capital has backed numerous healthtech companies, including Carbon Health, which, like One Medical, offers same-day appointments, virtual visits and other tech-enabled services.
Andrew Adams, co-founder and managing partner at Oak HC/FT and prior investor and board member at One Medical, also expects positive outcomes from increased competition in the space.
“Amazon is a phenomenal company, but you can’t ignore the big healthcare players [like] Optum-United, Cigna, Aetna CVS and Walgreens,” said Adams.
“[These companies] will want to make sure that they’re not behind the game in tech-enabled primary care. You could buy your way into that.”
The size of the US primary care market is estimated to be worth more than $266 billion in revenue, according to IBISWorld, an industry research company. For now, a good chunk of patients in the US are still served by legacy practices, where it can take weeks to get an appointment, forms must be filled out by hand, and billing is arcane and inefficient.
It is not an experience patients like or want. If Amazon decides to offer the convenience of One Medical to its 200 million Prime members, incumbent providers will likely start losing patients in droves.
They will have to find a way to keep up with tech-enabled players.
“I think it would be very strange if this [deal] doesn’t set off a domino effect of other M&A [deals],” said Ambar Bhattacharyya, a managing director at Maverick Ventures. His firm was an investor in One Medical before it went public in early 2020.
Large healthcare companies have many digital-first primary care startups to choose from as acquisition targets, including Cityblock, Forward and Carbon Health.
And now that the IPO window is shut tight, prospects of exits via a strategic sale are especially appealing to entrepreneurs and investors.
What’s more, Amazon’s acquisition of One Medical will do more than kick off a wave of M&A activity. It should help drive demand for various healthtech offerings, from patient engagement tools to wearable devices.
Antitrust regulators may be watching Big Tech’s M&A moves like hawks, but there is a low likelihood that they will want to block this deal. The entire healthcare industry, especially consumers, should benefit from healthy (pun intended) competition that Amazon will likely spur.
Featured image by Mara Potter/Getty Images
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