Smith Brain Trust / July 2, 2018

Three Ways Amazon Is Shaking Up U.S. Healthcare

Its $1B Deal To Buy PillPack Is Just Latest Move

Three Ways Amazon Is Shaking Up U.S. Healthcare

SMITH BRAIN TRUST – First it was book selling, and then it was retail of all kinds. Later came cloud storage services, streaming entertainment and online advertising. Now with three big moves, Amazon is disrupting healthcare. And that’s a good thing, says Ritu Agarwal, professor and senior associate dean for research at the University of Maryland’s Robert H. Smith School of Business

“There is no other sector in the U.S. economy that is in need of greater transformation than healthcare,” says Agarwal, who is also the founder and director of the Smith School’s Center for Health Information and Decisions Systems.

“From medical errors, to skyrocketing costs, to spotty access to services, to outrageously priced drugs, the inefficiency and lack of quality in the U.S. healthcare system have been a persistent conundrum for policymakers. Enter Amazon, with three bold steps that have shaken markets.”

Step 1: In what Agarwal describes as “the first of a salvo of moves,” Amazon partnered with Berkshire Hathaway and JP Morgan Chase in early 2018 to create an independent healthcare company that would leverage technology to provide health care at better prices. The partners said the new entity would be “free from profit-making incentives.”

Step 2: Then, last week Amazon charged into the pharmacy business with a reported $1 billion acquisition of online pharmacy startup Pillpack. The announcement rattled investors, bringing down the value of rivals across the $270-billion-a-year pharmacy sector, among them CVS, Walgreens and RiteAid.  “What does Amazon bring to the table?” Agarwal asks. “Besides lots of capital, Amazon’s unparalleled ability to leverage technology and data – two ingredients essential for improving quality and reducing cost – make it a formidable opponent.”

Step 3: But what is most dramatic, Agarwal says, is Amazon’s choice of physician and prolific writer Atul Gawande as CEO of the joint healthcare initiative with Berkshire Hathaway and JP Morgan Chase. Agarwal says Gawande will bring to the job “deep and thoughtful insight” into what’s needed to improve healthcare practice and delivery. “This signals that Amazon is looking for creative solutions and perhaps radical change,” Agarwal says, “both sorely needed in healthcare.”



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