Amazon (AMZN -1.65%) seems intent on being a big player in healthcare.
Although it pulled the plug on its telehealth business last year, the company doesn't appear to be giving up on the industry. It has a pending acquisition of primary care company 1Life Healthcare (also known as One Medical) that could close this year. It was also recently rumored to be in talks to acquire home health company Signify Health before losing out to CVS Health.
Most recently, in January, Amazon also unveiled a way for customers to save more money on prescriptions. Where could all this be headed? Let's take a look.
A prescription plan for just $5 per month
Offering low-priced prescription medication has been on Amazon's radar for a while. In 2018, the tech giant announced plans to acquire online pharmacy PillPack, making it easy for customers to buy prescription medications online and have them delivered to their doors. A few years later, the company built off of that to launch Amazon Pharmacy, allowing customers to manage their prescriptions and update insurance information on Amazon's website.
On Jan. 23, Amazon went a step further with the announcement of RxPass, which, for $5 per month, will give Prime members the ability to buy all their eligible generic medication for a flat fee, and have it delivered. The plan covers medications that treat over 80 conditions. It's an attractive option, especially for people who don't have insurance.
The one caveat is that consumers will also have to have an existing Prime subscription, which costs $139 per year, or $14.99 per month.
Are more healthcare acquisitions in Amazon's future?
It's clear that the company does want to get deeper into healthcare -- but that's proving to be tougher than it thought. In 2021, Amazon abandoned a joint venture with JPMorgan Chase and Berkshire Hathaway that was focusing on lowering healthcare costs. And last year, Amazon ditched its own telehealth service, which failed to make much progress and often cited Amazon's own subsidiary Whole Foods as a key customer.
Trying to expand into the industry organically has become a challenge, and so pursuing more mergers and acquisitions could be inevitable. And with many healthcare stocks trading at significantly reduced valuations due to the current bear market, the time may be ripe for Amazon to look for another big healthcare deal.
GoodRx Holdings is a company that provides consumers with discounts to help save on prescription medication; at a valuation of just over $2 billion right now, it would cost about half as much as Amazon's $3.9 billion acquisition of 1Life Healthcare. Telehealth provider American Well is even cheaper, with a valuation barely above $1 billion.
These are just a couple of examples of low-hanging fruit that Amazon could potentially acquire to quickly expand its opportunities within healthcare.
Is Amazon a good option for healthcare investors?
Amazon is phenomenal in dominating online retail, but that doesn't mean it will automatically do just as well in healthcare. However, I fully expect the company to make more acquisitions in healthcare; I'm amazed that it hasn't already bought or made a significant investment in GoodRx, given how cheap and complementary to Amazon's healthcare operations that would be right now.
If you want to invest in a healthcare company, you're still better off investing in one of the businesses already leading in that space. Amazon still has a long way to go and there's no certainty it will ever become a big player in the healthcare industry. Plus, with the company in the midst of layoffs and slashing costs, it may have bigger things to worry about right now.
Amazon could be a great buy simply because of its strength in online retail, but don't expect healthcare to significantly transform its business just yet.
