Monday, August 15, 2022

Amazon to buy One Medical for $3.9 billion in major

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Amazon will acquire primary care provider One Medical for $3.9 billion, the companies announced Thursday, in a major expansion of the tech giant’s health-care ambitions.

The deal — one of its largest acquisitions ever — will give Amazon a physical network of health-care offices and providers, as well as access to technology the start-up has built to enable virtual doctor visits. It adds to the company’s existing health-care portfolio, which includes an online pharmacy and Amazon Care, a virtual and in-home urgent care service.

But privacy advocates are raising concerns about the consequences of the tech giant — which already knows what millions of customers have purchased and asked Alexa — getting access to patients’ health-care records. And some of Amazon’s health-care efforts have stumbled in the past.

Amazon will be able to partner its new purchase with its other health-care initiatives, including an online pharmacy, said Daniel Grosslight, a health-care tech research analyst at Citi.

“They acquired an asset here to supercharge where they were already headed,” he said.

In a release announcing the deal, Neil Lindsay, senior vice president of Amazon Health Services, said health care is in need of reinvention. (Amazon founder Jeff Bezos owns The Washington Post.)

One Medical is a membership-based primary care provider that uses a strategy of planting offices close to where people work, and it has billed itself as more of a tech company by allowing members to use an app to book appointments and track health records. Headquartered in San Francisco, the company operates 188 offices in major metro areas including Atlanta, Chicago, Los Angeles and the District.

It has 767,000 members, and patients are typically charged an annual subscription fee of $199. But the company is not profitable, according to its most recent quarterly report.

Amazon’s offer of $18 a share represents a 77 percent premium for 1Life Healthcare, One Medical’s parent company.

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Already, however, some patients are wary of Amazon’s move into their doctor’s offices.

Megan Broderick, a book editor who lives in the Bronx, has been a patient with One Medical for several years. Her employer pays for the membership fee and she has been happy with the care she has received, she said.

But “Amazon is not great at being a retailer without major detrimental effects on society,” the 29 year-old said. “The idea that they are trying to get into the medical space is terrifying.” She’s unsure of whether she’ll stick around under the new ownership.

Other tech giants, including Google, Microsoft and Apple, have also made forays into health care in recent years, drawn to the industry’s huge size and relative lack of technical prowess. But the moves have also drawn scrutiny from regulators and privacy advocates, who worry about the growing access to sensitive data the companies wield.

That’s been heightened in recent weeks, following the Supreme Court decision overturning the landmark abortion rights ruling Roe v. Wade, raising questions about how personal data could be used by state agencies to surveil and punish people seeking reproductive health services, including abortions.

In a letter Wednesday, six House Democrats demanded to know whether major cloud computing players Oracle and Amazon Web Services are taking steps to “protect the privacy rights of those seeking to exercise their reproductive rights.”

“Data collected and sold by your company could be used by law enforcement and prosecutors in states with aggressive abortion restrictions,” the lawmakers wrote, with particular concern about the collection and use of location data.

Because of the deal’s size, Amazon will be required to report the merger to both the Federal Trade Commission and Justice Department for antitrust review. Amazon is not one of the leading players in the health-care space, so traditionally the deal would not have attracted antitrust scrutiny. But it announced the deal as FTC Chair Lina Khan has promised to address the ever-expanding tentacles of Big Tech into various industries.

Khan (D) ascended to the helm of the FTC last year with wide expectations that she might pursue a lawsuit against the company, following her groundbreaking academic work that argued the company violates competition laws. When asked about Amazon’s increasing expansion into health care during a June interview, Khan told The Post that “our current approach to thinking about mergers still has more work to do to fully understand what it means for these businesses to enter into all these other markets and industries.”

Amazon, which got its start in the 1990s as an online book retailer, has grown its business over the past 20-plus years to encompass a delivery network roughly the size of UPS, a dominant cloud provider that allows companies to store data remotely and a vast ecosystem of Alexa-powered devices. And it has grown its Prime membership program to more than 200 million globally.

The company frequently takes a spaghetti-against-the-wall approach to building its businesses — and sometimes fails.

Amazon in the past has turned to acquisitions to quickly expand its reach and expertise, including with its nearly $14 billion purchase of Whole Foods in 2017 and more recently its $8 billion bid for movie studio MGM. The company for years had worked to build both its grocery business and studios, and those acquisitions provided a quick way for Amazon to get a jump-start.

The acquisition of One Medical — which is considered something of a boutique service and already follows a subscription business model — is likely to provide a similar boost to Amazon’s existing health-care businesses.

“To me, this acquisition today is as relevant to health care as what the acquisition of Whole Foods was to the grocery industry,” said Tom Andriola, chief digital officer for University of California at Irvine.

Buying One Medical is just the latest move in Amazon’s years-long push to break into the health-care industry.

One of its first big moves floundered, however. Known as Haven, it was an ambitious effort by three of America’s most prominent companies — Amazon, JPMorgan Chase and Berkshire Hathaway — to address soaring health-care costs and improve patient outcomes. But it shuttered last year after only two years.

Amazon bought online pharmacy PillPack for $753 million in 2018, which it eventually turned into Amazon Pharmacy. The company’s cloud computing division, Amazon Web Services, offers specific products for health care and a health-care accelerator for start-ups. The company has also used its Amazon Business e-commerce offering to target hospitals, according to reports.

And the company built Amazon Care with the help of yet another acquisition of smaller medical tech start-up, Health Navigator. The service offers telehealth visits and in-home visits for employees of certain companies including Hilton in some cities.

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In leaked audio of an all-hands meeting in November, Amazon chief executive Andy Jassy told staff that Amazon Care is one of the company’s top innovations, highlighting that the division is aiming to expand through partnerships and new services, Insider reported this year.

Citi analyst Grosslight said Amazon could use the One Medical acquisition to even further integrate its businesses, for example pointing people to buy nutritional food at Whole Foods or getting prescriptions from Amazon Pharmacy.

“It’s really the entry point for Amazon,” he said. “And then it’s about what else can Amazon do with a patient.”

Technology within the health-care industry accelerated by about a decade of progress during the pandemic, largely by necessity, Forrester research director Natalie Schibell said. If Amazon’s purchase can be used to further develop technology to lessen the burden on providers and increase access to care, it could be good for patients, she said.

But some critics have already raised concerns about Amazon getting too close to patient health-care information.

“Amazon’s takeover of One Medical is the latest shot in a terrifying new stage in the business model of the world’s largest corporations,” Barry Lynn, the executive director of the left-leaning Open Markets Institute, said in a statement. “The deal will expand Amazon’s ability to collect the most intimate and personal of information about individuals, in order to track, target, manipulate, and exploit people in ever more intrusive ways.”

Amazon said in a statement Thursday that the deal won’t change the fact that One Medical has to comply with HIPAA.

“Both One Medical and Amazon have stringent policies protecting customer privacy in accordance with HIPAA and all other applicable privacy laws and regulations,” Amazon spokeswoman Angie Quennell said in a statement. “Customers’ Protected Health Information (PHI) is protected by Amazon’s practices and by law, including HIPAA, and we will retain our focus on this as we continue to grow our healthcare businesses, including the acquisition of One Medical.”

She declined to comment on whether Amazon would integrate One Medical services with any of its own services.

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Schibell pointed out that people are now more accountable and concerned than ever about who has access to their health information, especially as more health care moves into a virtual world.

“This is really going to cause greater looks and scrutiny into medical data, HIPAA regulations and really the implications for consumers when more and more health care is online,” she said.

Cat Zakrzewski and Christopher Rowland contributed to this report.

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