Amazon buys US medical supplier as it cements into healthcare | Amazon

Amazon will buy primary care organization One Medical in a deal worth about $3.9 billion, marking another expansion for the retailer into healthcare.

The Seattle-based e-commerce giant said in a statement Thursday that it is acquiring One Medical for $18 per share in an all-cash transaction. It is one of Amazon’s biggest acquisitions, following the $13.7 billion deal to buy Whole Foods in 201[ads1]7 and the $8.5 billion purchase of Hollywood studio MGM, which closed earlier this year.

One Medical, whose parent company is San Francisco-based 1Life Healthcare, Inc., is a membership-based service that offers virtual care as well as in-person visits. It also partners with more than 8,000 companies to provide its health benefits to employees.

As of March, One Medical had about 767,000 members and 188 medical offices in 25 markets, according to its first-quarter earnings report, which also showed the company had incurred a net loss of $90.9 million after taking in $254.1 million in revenues. The total deal value announced Thursday includes One Medical’s debt.

Neil Lindsay, senior vice president of Amazon Health Services, said in a statement that the acquisition is aimed at reinventing the healthcare “experience” for things like booking appointments and taking trips to the pharmacy.

“We love inventing to make what should be simple easier, and we want to be one of the companies that help dramatically improve the healthcare experience over the next few years,” said Lindsay.

Overall, consumer demand for telemedicine and virtual healthcare visits exploded during the Covid-19 pandemic. Healthcare payers such as employers and insurance companies are also becoming more focused on improving access to patient care and ensuring that their patients stay on top of their health, see their doctors regularly and take prescriptions.

Health care costs have been rising faster than wages and inflation for years and represent a major expense for employers who offer coverage. Employers and insurers believe that by connecting people to regular care, they can prevent expensive hospital stays from happening or keep chronic conditions like diabetes from causing bigger problems.

For Amazon, the acquisition deepens its foray into healthcare, the latest industry the company has tried to disrupt. In 2018, it bought online pharmacy PillPack for $750 million before opening its own online store that allows customers to order medications or prescription refills and have them delivered to their front door within a couple of days. And last year, it began offering its Amazon Care telemedicine program to employers across the country.

Neil Saunders, CEO of GlobalData Retail, said it is not surprising that Amazon is expanding its footprint in healthcare. The company’s retail and cloud businesses are becoming more mature, and it is looking for new opportunities for growth, Saunders said. Healthcare, which is complex but extremely lucrative, is an attractive option. But making a big splash isn’t always easy.

“Amazon will have to work extremely hard and be extremely innovative if it’s going to do more than shake up the margins a bit,” Saunders said in a statement. “Based on past form, the jury is out on whether Amazon can actually achieve this. As much as it has made some inroads into online pharmacies, it hasn’t revolutionized the market. Nor did its acquisition of Whole Foods — the biggest deal in history — lead to major disturbances.”

The deal comes as Amazon and other big tech companies face scrutiny from lawmakers about their market power. Shortly after the company’s announcement on Thursday, critics called on U.S. regulators to block the purchase, arguing it puts privacy at risk.

“Amazon’s takeover of One Medical is the latest shot in a terrifying new stage in the business model of the world’s largest companies,” said Barry Lynn, executive director of the Open Markets Institute, an organization that advocates for tougher antitrust regulation. “The agreement will expand Amazon’s ability to collect the most intimate and personal information about individuals, to track, target, manipulate and exploit people in increasingly intrusive ways.”

During the pandemic, One Medical faced a congressional investigation following reports that the company breached guidelines for Covid-19 vaccines. The investigation concluded in December that the company had exploited “access to scarce coronavirus vaccines to advance the company’s business interests” and pressure vaccine seekers into paying for memberships. It also said the company and its employees prioritized vaccinations for family and friends.

In afternoon trading, shares of 1Life Healthcare rose 69% to $17.17. Amazon added less than 1% to $123.75.

The agreement is subject to approval by the authorities. Upon completion, Amazon said One Medical CEO Amir Dan Rubin will remain in his position.

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