Amazon will acquire primary care organization One Medical in an approximately $3.9 billion deal, marking another expansion of the healthcare retailer.
The Seattle-based e-commerce giant said in a statement Thursday that it is buying One Medical at $18 a share in a cash deal. It’s one of Amazon’s biggest acquisitions since its $13.7 billion Whole Foods deal in 2017 and its $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 assistance as well as in-person visits. It also partners with over 8,000 companies to provide health benefits to its employees.
As of March, One Medical had approximately 767,000 members and 188 medical offices across 25 markets, according to its first-quarter earnings report, which also showed the company posted a net loss of $90.9 million after generating revenue of $254.1 million. The total value of the deal, announced Thursday, includes One Medical’s debt.
Neil Lindsay, senior vice president of Amazon Health Services, said in a statement that the acquisition aims to reinvent the healthcare “experience” for things like appointments and trips to the pharmacy.
“We love to invent to simplify what should be simpler, and we want to be one of the companies that will help significantly improve the quality of healthcare over the next few years,” Lindsay said.
In general, consumer demand for telemedicine and virtual health services has skyrocketed during the Covid-19 pandemic. Health care bill payers, such as employers and insurers, are also increasingly focusing on improving access to patient care and ensuring that their patients monitor their health, visit doctors regularly and take prescriptions.
Health care costs have risen faster than wages and inflation for years and represent a huge cost for employers who offer insurance coverage. Employers and insurers believe that by connecting people to regular care, they can prevent costly hospital stays or prevent chronic diseases like diabetes from developing into more serious problems.
For Amazon, the acquisition deepens its forays into healthcare, the newest industry the company has been looking to disrupt. In 2018, she bought online pharmacy PillPack for $750 million and then opened her own online pharmacy, which allows customers to order drugs or prescription drugs and have them delivered to their homes in a couple of days. And last year, the company began offering its Amazon Care telemedicine program to employers across the country.
Neil Saunders, managing director of GlobalData Retail, said it’s not surprising that Amazon is expanding its presence in healthcare. The company’s retail and cloud computing business is becoming more mature, Saunders said, and the company is looking for new growth opportunities. Healthcare, which is difficult but extremely profitable, is an attractive option. But making a big splash isn’t always easy.
“Amazon will need to work really hard and be extremely innovative if it wants to do more than just shake things up a bit in the margins,” Saunders said in a statement. “Based on past form, we cannot decide if Amazon can actually achieve this. While it has had some success in online pharmacies, it has not revolutionized the market. The purchase of Whole Foods – the largest transaction in its history – did not result in serious violations.
The deal comes at a time when Amazon and other big tech companies are facing scrutiny from lawmakers about their bargaining power. Shortly after the company’s announcement on Thursday, critics called on US regulators to block the purchase, arguing it compromised privacy.
“Amazon’s takeover of One Medical is the latest step in a new, frightening phase in the business model of the world’s largest corporations,” said Barry Lynn, executive director of the Open Market Institute, an organization that advocates for tougher antitrust regulation. “The deal will enhance Amazon’s ability to collect the most intimate and personal information about people in order to track, target, manipulate and exploit people in even more intrusive ways.”
During the pandemic, One Medical faced congressional investigation after reports that the company violated Covid-19 vaccine guidelines. The investigation concluded that in December the company took advantage of “its access to scarce coronavirus vaccines to advance the company’s business interests” and nudged vaccine seekers into paying for its membership. It also states that the company and its employees prioritize vaccinations for family and friends.
In the afternoon, 1Life Healthcare shares rose 69% to $17.17. Amazon added less than 1% to $123.75.
The deal is subject to regulatory approval. Upon completion, Amazon said that One Medical CEO Amir Dan Rubin would remain in his post.
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