The Digital Transformation Of The Health Care Industry

Stuart Elmes

While WebMD and similar sites have been around for years, the health care industry hasn’t been particularly affected by the growth of eCommerce. Our relationships with hospitals, doctors, and nurses are deeply ingrained in our behaviour and expectations when we get sick. But Amazon has long been eyeing the lucrative health care market, and when Amazon makes a move, the global economy sits up and takes notice. And with the COVID-19 pandemic raging around the world, the opportunity for any provider allowing those suffering to access health services and supplies remotely would seem to sky-high. Let’s take a look at the ways digital commerce has changed the healthcare industry, and what the future could hold.

Prescriptions Are Migrating Online

Amazon purchased the website PillPack in 2018 for a reported $753 million. The company has pharmacy licenses in all 50 American states and fills prescription orders with multiple medications sorted into single-dose packs with printed instructions on when the pills should be consumed. PillPack is one of a number of companies which offer online prescription services, including Capsule, ScriptAssist, and DivvyDose, a service which is tailor-made for the emerging replenishment economy.

What Amazon and PillPack CEO TJ Parker realized was that the major players in the prescription pharmaceuticals market were unable or unwilling to prioritize the customer’s wants and needs. PillPack offered an automatic prescription renewal, round the clock customer service, and the promise of reducing unnecessary trips to crowded, germ-ridden drug stores. CNBC reports that before the acquisition, PillPack had plans to grow revenue to $1 billion annually by 2020, and was negotiating with large insurers to make their service available to a majority of Americans. 

With the lobbying, negotiating, and marketing power of Amazon behind it, PillPack is expected to rapidly expand its business, and forge ahead making partnerships with America’s largest insurers. Free shipping for Prime members also means that the service is accessible and free for a significant percentage of consumers. The average PillPack customer was worth $5000 per year in 2018, significantly more than the $1300 the average Prime subscriber spent in that year. And Amazon clearly senses an opportunity to sell an aging demographic (PillPack has had a lot of success with seniors taking multiple medications) on eCommerce, offering them the toothpaste, razor blades, and toilet paper that they might have previously bought at the drug store.

A Crisis And An Opportunity

With the COVID-19 crisis causing hysteria around the globe, we would expect to see a surge in the popularity of online health care options. Crowded (and overcrowded) hospitals present vulnerable populations, such as the elderly and those with auto-immune diseases or respiratory issues with a significant level of risk. Quarantine and social distancing also make the idea of consulting professionals, renewing prescriptions, or ordering supplies online an attractive proposition. Amazon has already teamed up with the Gates Foundation to deliver testing kits to the homes of those at risk for the new strain of Coronavirus in the Seattle Area. We would expect to see this trend continue, especially in those countries particularly hard hit by the illness. 

Big retailers with eCommerce experience like Wal-Mart, Amazon, and Ocado are experiencing massive surges in demand from shoppers looking to avoid crowded supermarkets. But as local and national health authorities struggle mightily to stock essential items such as hand sanitizer, surgical masks, test-kits, and other supplies, governments could soon turn to mobilizing the expertise of tech companies, sophisticated supply chains, and delivery infrastructure in the fight against this deadly disease. As we consider our unprecedented vulnerability to infectious disease in today’s globalized world, it’s not unreasonable to conclude that individuals and governments could slow the spread of COVID-19, and the next virus to rear its ugly head, by shifting more medical services into the digital realm. We would expect this shift to accelerate rapidly in the coming months.

What Else Is Amazon Up To?

Amazon also turned heads in 2018 with the announcement that they’d be partnering with Berkshire Hathaway and J.P. Morgan to create Haven, a venture that aims to provide health care for employees of the three firms, and also “to transform health care to create better outcomes and overall experience, as well as lower costs for you and your family.” Reports are that Haven will attempt to build a “risk-based clinically integrated network”, which would steer patients to an appropriate and cost-efficient solution that would eliminate over-charging and under-performing options. Their model would likely favour teleconferencing for non-urgent cases, and their team of executives includes not only medical experts, but also entrepreneurs and experts in medical technology and analytics, including an executive from ZocDoc, an app for booking doctors appointments and scheduling procedures, and CEO Atul Gawande, renowned surgeon and writer on medical issues for the New Yorker magazine.

As one analyst writes, the fact that these three massive companies have stood up and said that they’re ready to change the incredibly inefficient, $3.5 trillion US healthcare industry portends massive change, whether Haven succeeds or not. We’d expect forward-thinking entrepreneurs like Warren Buffett and Jeff Bezos to leverage the massive data they can acquire to streamline costs, revamp the supply chain, and find more efficient ways to deliver medical services. 

The Future

We are still in the very early stages of health care’s digital transformation, but we feel confident proclaiming that large-scale change will soon arrive. As big tech companies move into the industry, we’ll likely move into a paradigm that allows more services to be accessed remotely, more supplies and medicines to be delivered directly, and an overall shift away from the hospital, clinic, and drug store as the only places to go for medical treatment. While these changes are likely to begin in America, where healthcare is a massively profitable industry, it’s safe to assume that they’ll soon spread around the globe as governments and doctors realize that technology, data, and AI can dramatically cut costs and improve outcomes. Let’s just hope this transformation comes sooner rather than later.