Amazon (AMZN 1.96%) appears intent on being an enormous participant in healthcare.
Though it pulled the plug on its telehealth enterprise final yr, the corporate does not seem like giving up on the trade. It has a pending acquisition of major care firm 1Life Healthcare (often known as One Medical) that might shut this yr. It was additionally lately rumored to be in talks to accumulate residence well being firm Signify Well being earlier than shedding out to CVS Well being.
Most lately, in January, Amazon additionally unveiled a approach for purchasers to save lots of extra money on prescriptions. The place might all this be headed? Let’s have a look.
A prescription plan for simply $5 per thirty days
Providing low-priced prescription medicine has been on Amazon’s radar for some time. In 2018, the tech big introduced plans to accumulate on-line pharmacy PillPack, making it simple for purchasers to purchase prescription medicines on-line and have them delivered to their doorways. Just a few years later, the corporate constructed off of that to launch Amazon Pharmacy, permitting prospects to handle their prescriptions and replace insurance coverage info on Amazon’s web site.
On Jan. 23, Amazon went a step additional with the announcement of RxPass, which, for $5 per thirty days, will give Prime members the flexibility to purchase all their eligible generic medicine for a flat charge, and have it delivered. The plan covers medicines that deal with over 80 situations. It is a beautiful possibility, particularly for individuals who do not have insurance coverage.
The one caveat is that customers will even need to have an current Prime subscription, which prices $139 per yr, or $14.99 per thirty days.
Are extra healthcare acquisitions in Amazon’s future?
It is clear that the corporate does wish to get deeper into healthcare — however that is proving to be more durable than it thought. In 2021, Amazon deserted a three way partnership with JPMorgan Chase and Berkshire Hathaway that was specializing in decreasing healthcare prices. And final yr, Amazon ditched its personal telehealth service, which did not make a lot progress and infrequently cited Amazon’s personal subsidiary Complete Meals as a key buyer.
Making an attempt to develop into the trade organically has change into a problem, and so pursuing extra mergers and acquisitions may very well be inevitable. And with many healthcare shares buying and selling at considerably diminished valuations because of the present bear market, the time could also be ripe for Amazon to search for one other huge healthcare deal.
GoodRx Holdings is an organization that gives customers with reductions to assist save on prescription medicine; at a valuation of simply over $2 billion proper now, it could value about half as a lot as Amazon’s $3.9 billion acquisition of 1Life Healthcare. Telehealth supplier American Properly is even cheaper, with a valuation barely above $1 billion.
These are simply a few examples of low-hanging fruit that Amazon might probably purchase to shortly develop its alternatives inside healthcare.
Is Amazon possibility for healthcare buyers?
Amazon is phenomenal in dominating on-line retail, however that does not imply it’s going to robotically do exactly as nicely in healthcare. Nevertheless, I totally anticipate the corporate to make extra acquisitions in healthcare; I am amazed that it hasn’t already purchased or made a big funding in GoodRx, given how low cost and complementary to Amazon’s healthcare operations that will be proper now.
If you wish to put money into a healthcare firm, you are still higher off investing in one of many companies already main in that house. Amazon nonetheless has a protracted strategy to go and there isn’t any certainty it’s going to ever change into an enormous participant within the healthcare trade. Plus, with the corporate within the midst of layoffs and slashing prices, it might have larger issues to fret about proper now.
Amazon may very well be an excellent purchase merely due to its power in on-line retail, however do not anticipate healthcare to considerably remodel its enterprise simply but.
John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. JPMorgan Chase is an promoting accomplice of The Ascent, a Motley Idiot firm. David Jagielski has no place in any of the shares talked about.
The Motley Idiot has positions in and recommends Amazon.com, Berkshire Hathaway, GoodRx, and JPMorgan Chase. The Motley Idiot recommends CVS Well being and recommends the next choices: lengthy January 2023 $200 calls on Berkshire Hathaway, quick January 2023 $200 places on Berkshire Hathaway, and quick January 2023 $265 calls on Berkshire Hathaway. The Motley Idiot has a disclosure coverage.
