Amazon to Acquire One Medical Clinics in $3.9 Billion Deal – The New York Times

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The $3.9 billion deal is Amazon’s latest acquisition in the health care industry. In 2018, it acquired PillPack, an online pharmacy.
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By Karen Weise
SEATTLE — Just two months ago, Andy Jassy, almost a year into his reign as Amazon’s chief executive, told investors that driving down costs was a “really big area of focus,” after the company produced its worst quarterly earnings in years. But that didn’t mean he wasn’t open to a deal.
On Thursday, Amazon announced its first major acquisition under Mr. Jassy’s tenure as C.E.O., spending $3.9 billion for One Medical, a chain of primary care clinics around the country. One Medical’s share price was down more than 80 percent since its peak last year, and, in a statement, Amazon said it would acquire the company for $18 per share in an all-cash transaction.
The deal is a sign of Amazon’s long-simmering health care ambitions. As the company has marched from one retail business to another — including books, CDs, electronics, dog food, diapers and clothes — it has had to look in less obvious spots to find opportunities that can provide meaningful expansion.
Health care has been tantalizing to Amazon executives who believe it is an immense market, rife with inefficiencies and generally lacking the kind of customer-focused approach that Amazon tries to take with its businesses. But none of the company’s forays into health care have had notable success nor have they been as big as the One Medical acquisition.
“We think health care is high on the list of experiences that need reinvention,” Neil Lindsay, the senior vice president of Amazon Health Services, said in a statement announcing the deal.
Mr. Lindsay ticked off some of the annoyances of modern health care: booking appointments, sitting in waiting rooms, traveling to a pharmacy, even finding a parking spot. Amazon’s notion of seeing a provider could include more virtual or online care, which health care companies like One Medical and Kaiser Permanente are already doing.
Amazon wants to be the “front door” through which customers access health care, said Christina Farr, an investor in health care with OMERS Ventures. “They want to nail the consumer experience.”
Based in San Francisco, One Medical operates a network of 188 medical offices, primarily in large cities, and provides virtual medical services that patients access with a $199 annual membership. Last year, it spent $2.1 billion to acquire Iora Health, which provides care for seniors enrolled in Medicare.
That One Medical sees about five times as many virtual visits as in-person appointments most likely made it attractive to Amazon, according to analysts at the investment bank Cowen. The company also has something Amazon values deeply: data. One Medical built its own electronic medical records system, and it has 15 years’ worth of medical and health-system data Amazon could tap.
While individual patient records are generally protected under federal health privacy laws, the big data expertise that has fueled Amazon’s success can be powerful in health care — for predicting costs, targeting interventions and developing products and treatments, said Dr. Aaron Neinstein, a digital health expert at the University of California, San Francisco and a member of a federal advisory committee on the issue.
One Medical went public in 2020 at $22.07 a share. After hitting a peak of $58.70 last year, its stock price closed on Wednesday at $10.18. The company, which is not profitable, has missed recent Wall Street expectations amid a broader downturn for health care start-ups.
“We look forward to innovating and expanding access to quality health care services together,” said One Medical’s chief executive, Amir Dan Rubin, who will remain in his post after the deal closes. The deal requires approval from regulators and from One Medical’s shareholders.
Amazon’s ambitions in health care go back more than two decades. In 1999, Amazon invested in Drugstore.com, a darling of the dot-com bubble, and Jeff Bezos, Amazon’s founder and then its chief executive, served on Drugstore.com’s board.
But, in the past half-decade, Amazon has leaned into its own vision for health care. In 2018, it started Haven, a partnership with J.P. Morgan and Berkshire Hathaway. Those companies, three of the country’s largest employers, set out to explore new ways to deliver health care to their work forces. The amorphous effort attracted a lot of attention but stalled out and formally ended last year.
Amazon moved into the $560 billion prescription drug industry when it spent $753 million in 2018 to buy the start-up PillPack, an online pharmacy that focuses on recurring monthly medications. It later began Amazon Pharmacy, which, like PillPack, delivers medications, and it integrated discounts for customers with Prime memberships.
Despite those efforts, Amazon’s pharmacy business “thus far has failed to gain meaningful traction,” Cowen wrote.
In 2019, Amazon began running its own primary and urgent care service, called Amazon Care, to treat its employees, first in Washington State and then nationally. The service primarily is based on virtual sessions with providers, though it does offer home visits and has begun opening physical clinics in a few cities.
Amazon Care has tried to get other employers to offer the service, but it has had only limited success. In announcing a national expansion this year, it promoted Silicon Labs, TrueBlue and Whole Foods Market, which Amazon owns, as clients.
One Medical is far larger than Amazon Care, serving more than 8,500 employers and offering memberships directly to consumers.
Google is a major customer, sponsoring memberships for its employees and hosting One Medical clinics in some offices. This means that, after the acquisition, Amazon-owned clinics could be inside Google facilities. Google represented 10 percent of One Medical’s revenue in 2020, though less than that in 2021, according to One Medical’s annual report.
Last year, Amazon partly centralized its health care efforts under Neil Lindsay, a longtime Amazon veteran who previously led its enormous Prime membership program. Amazon declined to make Mr. Lindsay available for an interview.
It has a new partnership to start clinical trials on cancer vaccines, and has worked on offering diagnostics after setting up labs to test employees for the coronavirus.
Matt McIlwain, a managing partner at the Madrona Venture Group, in Seattle, and a former board chair of the Fred Hutchinson Cancer Research Center, which has worked with Amazon, said he expected the company would make more health care investments and acquisitions in the coming months and years.
“Amazon is taking a big run at a big challenge,” he said.
The value of the One Medical deal is above a threshold that requires the companies to report it to antitrust regulators at the Federal Trade Commission and the Justice Department. The agencies divvy up deals based on expertise and other factors, and it is unclear which one will review the acquisition. Both agencies declined to comment.
But the F.T.C. is already conducting a broad investigation into whether Amazon has broken antitrust laws, and it earlier reviewed its acquisition of the movie studio Metro-Goldwyn-Mayer.
Several groups that have been pushing for antitrust enforcement against Amazon, including the Institute for Local Self-Reliance, the Open Markets Institute and the American Economic Liberties Project, put out statements calling for regulators to oppose the deal.
Gregory Schmidt and David McCabe contributed reporting.
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