Amazon will acquire primary care organization One Medical in a deal valued at approximately $3.9 billion, marking another expansion of the healthcare services retailer.
The Seattle-based e-commerce giant said in a statement Thursday that it is buying One Medical for $18 a share in an all-cash deal. It’s one of Amazon’s biggest acquisitions, following the $13.7 billion deal to buy Whole Foods 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 care as well as in-person visits. It also works with more than 8000 companies to deliver its health benefits to employees.
As of March, One Medical had about 767,000 members and 188 medical offices in 25 markets, according to a first-quarter earnings report, which also showed the company incurred a net loss of $90.9 million after generating $254.1 million in revenue. The total value of the deal announced Thursday includes One Medical’s debt.
Neil Lindsey, Amazon’s senior vice president of health services, said in a statement that the acquisition is geared toward reinventing the healthcare “experience” for things like booking an appointment and taking trips to the pharmacy.
“We love to innovate to make what needs to be easier and we want to be one of the companies that greatly helps improve the healthcare experience over the next several years,” Lindsay said.
In general, consumer demand for telemedicine and virtual healthcare visits has increased during the Covid-19 pandemic. Healthcare billers such as employers and insurance companies are also becoming more focused on improving access to patient care and making sure their patients monitor their health, see their doctors regularly and take their prescriptions.
Health care costs have risen faster than wages and inflation for years and represent a huge expense for employers providing coverage. Employers and insurers believe that by connecting people to regular care, they can prevent costly hospital stays from occurring or prevent chronic conditions such as diabetes from causing even greater problems.
For Amazon, the acquisition deepens the penetration of healthcare services, the latest industry the company has sought to disrupt. In 2018, online pharmacy bought PillPack for $750 million before opening its own online drugstore that allows customers to order medications or prescription refills and have them delivered to their door in two days. And last year, it began offering Amazon Care telemedicine to employers across the country.
It’s no surprise that Amazon is expanding its presence in healthcare, said Neil Saunders, managing director at GlobalData Retail. Saunders said the company’s retail and cloud computing business is becoming more mature and is looking to find new opportunities for growth. Healthcare, which is complex but highly profitable, is an attractive option. But making a big splash isn’t always easy.
“Amazon will need to work very hard and be very innovative if it is to do more than shift margins a little bit,” Saunders said in a statement. “Based on the former figure, the jury is out on whether Amazon can actually make it happen. As much as it has had some success in online pharmacy, it hasn’t revolutionized the market. Nor has its acquisition of Whole Foods – the biggest deal in its history – into a great disturbance.”
The deal comes as Amazon and other major tech companies face scrutiny from lawmakers over their market power. Shortly after the company’s announcement on Thursday, critics called on US regulators to block the purchase, arguing that it jeopardizes privacy.
“Amazon’s acquisition of One Medical is the latest snapshot in a terrifying new phase in the business model for the world’s largest,” said Barry Lane, executive director of the Open Markets Institute, an organization that advocates for stricter antitrust regulation. “The deal will expand Amazon’s ability to collect the most private and personal information about individuals, in order to track, target, manipulate and exploit people in more intrusive ways than ever before.”
During the pandemic, One Medical faced a congressional investigation after reports that the company violated guidelines for Covid-19 vaccines. The investigation concluded in December that the company had used its “access to rare coronavirus vaccines to advance the company’s commercial interests” and push vaccine researchers to pay for its membership. She also said the company and its employees have prioritized vaccinations for family and friends.
In the afternoon, shares of 1Life Healthcare were up 69% to $17.17. Amazon added less than 1% to $123.75.
The transaction is subject to regulatory approval. Upon completion, Amazon said One Medical’s CEO, Amir Dan Rubin, would remain in the position.