Although it shut down its telehealth business last year, the company doesn't appear to be giving up on the sector. It has a pending acquisition of a primary care company. 1Life Healthcare (aka One Medical) which may close this year. It was also recently rumored to be in talks to acquire a home care company. means health before losing CVS Health.
More recently, in January, Amazon also revealed a way for customers to save more 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 medications has been on Amazon's radar for some time. In 2018, the tech giant announced plans to acquire online pharmacy PillPack, making it easier for customers to buy prescriptions online and have them delivered to their homes. A few years later, the company built on this to launch Amazon Pharmacy, allowing customers to manage their prescriptions and update their insurance information on Amazon's website.
On January 23rd, Amazon took a step forward with the announcement of RxPass, which, for $$5 per month, will give Prime members the ability to purchase all their eligible generic medications for a flat fee and have them delivered. The plan covers medications that treat over 80 conditions. It's an attractive option, especially for those without insurance.
The only caveat is that consumers will also need to have an existing Prime membership, which costs $1.39 per year or $1.49 per month.
Will there be more healthcare acquisitions in Amazon's future?
It's clear the company wants to delve deeper into healthcare, but it's proving more difficult than expected. In 2021, Amazon abandoned a joint venture with JPMorgan Chase AND Berkshire Hathaway that was focusing on reducing healthcare costs. And last year, Amazon abandoned its own telehealth service, which had not made much progress and frequently cited Amazon subsidiary Whole Foods as a key customer.
Trying to expand organically in the sector has become a challenge, so pursuing more mergers and acquisitions may be inevitable. And with many healthcare stocks trading at significantly reduced valuations due to the current bear market, it may be the right time for Amazon to look for another major healthcare deal.
GoodRx Holdings is a company that offers consumers discounts to help save money on prescription drugs; with a valuation of just over $2 billion at the moment, it would cost about half as much as Amazon's $3.9 billion acquisition of 1Life Healthcare. telehealth provider very American is even cheaper, with a valuation of just over US$1 billion.
These are just a few examples of low-hanging fruit that Amazon could acquire to rapidly expand its healthcare opportunities.
Is Amazon a good option for healthcare investors?
Amazon is phenomenal at dominating online retail, but that doesn't mean it will automatically do as well in healthcare. However, I expect the company to make further acquisitions in the healthcare space; I'm surprised it hasn't already acquired or made a significant investment in GoodRx, considering how accessible and complementary it would be to Amazon's healthcare operations at the moment.
If you're looking to invest in a healthcare company, it's still best to invest in one of the companies that is already a leader in this space. Amazon still has a long way to go, and it's not certain that it will ever become a major player in the healthcare space. Furthermore, with the company in the midst of layoffs and cost-cutting, it may have bigger things to worry about right now.
Amazon may be a great buy simply because of its strength in online retail, but don't expect healthcare to significantly transform its business just yet.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, serves on The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. David Jagelski holds no position in any of the stocks mentioned.
The Motley Fool has positions in and recommends Amazon.com, Berkshire Hathaway, GoodRx, and JPMorgan Chase. The Motley Fool recommends CVS Health and recommends the following options: long January 2023 $ 200 calls on Berkshire Hathaway, short January 2023 $ 200 calls on Berkshire Hathaway, and short January 2023 $ 265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.
