Can Amazon buy its way into the health care industry? It’ll have to try after pulling the plug on its own unit

So it should come as little surprise that the tech conglomerate is getting a tad restless with its high-risk, high-reward venture into the health care industry.

Nearly a year after CEO Andy Jassy heralded the promise of Amazon Care, the company’s primary-care initiative, corporate executives notified employees Wednesday that they were shuttering the program in December. In a message to employees, Amazon’s health services senior vice president said the in-person and telehealth endeavor “is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”

The decision followed many months of Amazon leaders praising Amazon Care’s potential as a revolutionary force in the $4 trillion–plus health industry. Insider reported earlier this year that Jassy, in a November 2021 all-hands meeting, called the company a “significant disrupter” in the field, with Amazon Care ranking among his most anticipated innovations. Company officials in February also announced plans to expand Amazon Care to 20 additional cities this year, including New York, Chicago, and San Francisco. 

Yet in some ways, the writing was on the wall for Amazon Care. 

Amazon Care hasn’t made much of a mark since debuting three years ago. The Washington Post reported last week that the initiative only has a half-dozen corporate customers, the largest of which is hospitality giant Hilton. Industry analysts suggested Amazon’s internal offering, which prioritized ease of use, wasn’t enough to persuade large corporate entities to abandon their traditional insurance and primary-care providers.

As a result, Amazon appears to be taking the quickest path to the top for impatient, cash-flush tech companies: buying their way there.

The company’s announcement in July that it planned to acquire primary-care provider network 1Life Healthcare, which operates One Medical, in a $3.9 billion, all-cash deal immediately rendered parts of Amazon Care redundant. The agreement, which is pending regulatory approval, would bring about 8,500 corporate clients, 800,000 member patients, and 200 medical offices into Amazon’s fold. In turn, Amazon can integrate its lessons from Amazon Care, particularly around patients’ digital user experience.

Amazon also remains on the hunt for additional purchases, with the Wall Street Journal reporting last weekend that the company is sniffing around Signify Health, a home health care provider that could fetch more than $8 billion at auction next month.

“I think [Amazon] was having some difficulty in penetrating the employer market with Amazon Care,” Michael Abrams, managing partner of health care consulting firm Numerof & Associates, told Fierce Healthcare last month. “With One Medical, it’s a huge shortcut to accelerated growth. They are planning to make a business in primary care, so this is just a real reinforcement of their commitment to the primary care space.”

David Larsen, an analyst for financial services firm BTIG, echoed the sentiment in a client note Wednesday, per Axios: “Our view is that it makes more sense to buy these platforms than it does to build new ones.”

Amazon still must overcome numerous hurdles in its quest to upend the frustratingly rigid health care industry. 

Amazon likely will need to bring thousands of additional corporate clients on board to turn a profit, but many companies are uneasy with overhauling employees’ health care insurance plans. Notably, 1Life Healthcare posted a net operating loss of $254 million in 2021.

Well-established rivals like CVS and UnitedHealthcare, as well as numerous telehealth startups, also will offer ample competition. Those companies have successfully fended off Amazon’s first forays, including an underwhelming (albeit still early) attempt to take a hearty slice of the prescription delivery market.

“We should never underestimate Amazon,” David Blumenthal and Lovisa Gustafsson, the president and vice president, respectively, of health care foundation the Commonwealth Fund, wrote in the Harvard Business Review earlier this month. “But we also shouldn’t underestimate the challenges it faces in working its usual magic in America’s huge, troubled, tangled health care sector.”

For now, at least this much is clear after Wednesday’s axing of Amazon Care: If the venture fails, it won’t be because company leaders refused to act decisively.

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Jacob Carpenter

NEWSWORTHY

Going off the rails. Peloton posted losses of $1.2 billion in its fiscal fourth quarter as the fitness company endured a sharp decline in demand and high restructuring costs, the Wall Street Journal reported Thursday. Fourth-quarter revenues totaled $679 million, down nearly 30% year over year, as consumers continued to return to gyms and reduce their spending amid a period of high inflation. Peloton shares fell 18% in midday trading Thursday, reversing Wednesday’s 20% jump on news that the company would start selling its products on Amazon’s e-commerce platform.

A soft outlook. Salesforce shares slipped 5% in midday trading Thursday after the software giant cut its full-year guidance, citing global economic concerns, Barron’s reported. Company executives now project revenues for the fiscal year ending in January 2023 of roughly $31 billion, down about $800 million from earlier forecasts. Salesforce’s fiscal second-quarter earnings and revenues edged past analyst estimates, while the company also announced a $10 billion stock buyback program.

Turning the game off. Nvidia’s second-quarter earnings and revenue fell far short of analysts’ expectations, largely owing to a slowdown in sales across the gaming sector, CNBC reported. The chipmaker, whose graphics cards help power many higher-end gaming PCs, totaled $6.7 billion in revenue, well off Wall Street’s forecast of $8.1 billion. Nvidia’s gaming department revenue sank 33% year over year, mirroring broader trends afflicting the video game industry in recent months. Nvidia shares still rose 4% in midday trading Thursday.

Mark your calendars. Apple announced Wednesday that it will hold a product launch event on Sept. 7, when the company is expected to unveil the iPhone 14 and its newest line of Apple Watches. Previous reports by Bloomberg suggest Apple will offer four models of the latest iPhone, which traditionally accounts for about half of the company’s annual sales. Apple is expected to debut several new hardware products in the final months of 2022, including new Macs and iPads.

FOOD FOR THOUGHT

A bad influencer? Somebody in the U.S. took a page out of the Russian and Iranian online influence playbook—and Facebook and Twitter aren’t having it. The Washington Post, citing a new report from social media analytics firm Graphika and Stanford University researchers, reported Wednesday that the two platforms removed a covert influence operation pushing pro-U.S. messages in the Middle East and Asia. Facebook officials said it’s the first time they have swatted down a U.S.-based political influence campaign, which violates the company’s policies. The researchers said the effort, which included sharing news articles and messages criticizing Russia’s invasion of Ukraine, appeared to garner minimal traction. It’s unclear who launched the campaign.

From the article: 

Covert influence campaigns run out of Russia and Iran have repeatedly been targeted by social media platforms over the years. This crackdown is the rare instance in which a U.S.-sponsored campaign targeting foreign audiences was found to violate the companies’ rules.

The accounts are being taken down at a time when social media giants have been trying to crack down on disinformation campaigns about the war in Ukraine. But much of that work has been focused on fighting efforts by Russian authorities to promote propaganda about the war, including false claims about Ukrainian military aggression in the region or blaming Western nations’ complicity in the war.

IN CASE YOU MISSED IT

Apple, Honda, and Mazda reportedly consider diversifying manufacturing away from China after supply-chain chaos, by Nicholas Gordon

Ethereum Foundation confirms start date for ‘merge’ transition, by Taylor Locke

No longer willing to work as long as his staff, the co-CEO of Sam Bankman-Fried’s crypto hedge fund steps down, by Christiaan Hetzner

You still can’t find a PlayStation 5, but if you do it’s now probably going to cost you more depending on where you live, by Chloe Taylor

Uniswap Labs ‘eagerly awaiting’ Ethereum ‘merge,’ signals support for proof-of-stake chain, by Taylor Locke

Corporations break themselves up all the time. So why shouldn’t regulators break up Big Tech? by Denise Hearn

BEFORE YOU GO

Get your popcorn ready. At this point, MoviePass kind of feels like an on-again, off-again significant other, one who keeps promising this time will be different before eventually leaving you disappointed. The reborn movie-ticket subscription company’s latest slipup came Thursday morning, when its servers crashed minutes after opening sign-up for its much-anticipated wait list, Insider reported. The gaffe comes as MoviePass aims to resume operations on Labor Day, three years after it sank into bankruptcy under the weight of an obviously unsustainable business model ($10 per month for unlimited movie tickets) and less-than-transparent practices. Company leaders have heralded MoviePass’s renaissance, but they’ve been conspicuously quiet about key details, including their plans for a pricing structure.