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Amazon and Health Care

07/07/17

Category:

By:

Pete Allen, Executive Vice President, Sourcing Solutions

It is indisputable that Amazon has changed the way American consumers expect to buy things. 

We expect immediate price comparison abilities. We can buy and carry an entire bookshelf with us on trips. We can order anything from batteries to clothes to books to groceries (and much more) in a matter of seconds from one website. And often, we get it all delivered with two-day shipping.  

But how does that translate to other industries? Especially those as complex as health care?

Recently, Amazon hosted a health care industry event (MDSI’s IDN Insights West conference) at their Seattle headquarters. Amazon used that platform to announce their plans to enter the health care supply market. A handful of publications, including Modern Healthcare and The Journal of Healthcare Contracting, have since published articles about Amazon’s potential market disruption.

Although it’s getting a lot of attention right now, this announcement comes as no surprise. Amazon has been investing in capabilities in the business-to-business space for many years.

But what does that mean to the health care industry? Well, let’s break that down – especially based on what we’re hearing from our members.

Initially, Amazon is focusing their go-to-market efforts around the non-acute space where some organizations’ buying behavior is more similar to the consumer market. Currently, some physician practices and other smaller health care organizations are already using Amazon Business (their B2B arm) to purchase commodity health care supplies. Simultaneously, they are researching the provider needs and requirements in the acute care space. 

The media coverage so far predicts that the most likely market disruption is for health care distributors – primarily those in the non-acute segment. We agree that the most likely initial impact will be in the non-acute and medical-surgical commodities space, as the larger acute care distribution market is much more complex with integrated technologies, state and federal regulations, and other variables involved. 

Our members, while excited about the lower prices that competition on this scale could bring, remain a bit skeptical. As providers continue to build out clinically integrated supply chains across the continuum of care, they are focused on both quality outcomes and cost. Clinical quality and supply chain expertise are both required to come together in an integrated fashion in order to have the impact that providers expect.

In other words, you can’t deliver sustained cost improvements and improved clinical care in a cardboard box left by a drone. Health care is more complicated than just a third-party logistics play. As such, Amazon will experience several barriers in the acute care market that do not exist in the consumer market. 

Nevertheless, Amazon definitely has the potential to shake up the system. 

And we firmly believe competition in the supply chain space is good for the health care industry. It inspires innovation among all of us. And most importantly, it drives down overall costs for providers and patients.

The Vizient model, driven by the largest volume in the industry, a suite of complementary services/analytics, and our long-time provider relationships, can, and does, drive value for our provider members. At the same time, we also believe that the health care industry is facing tremendous pressure and upheaval, and in response, we continue to look for new and innovative ways to serve the needs of our members and continue our role as their indispensable partners.

Disruption breeds innovation. And we thrive on innovation.

About the author. Pete Allen leads the Vizient sourcing and contracting operations, including its programmatic offerings, specialty sourcing activities and Apexus, the exclusive contractor for the 340B Drug Pricing Program, managed by the U.S. Health Resources & Services Administration. He leads teams focused on driving quality, efficiency and cost performance across the care continuum. Allen has more than 24 years of health care supply chain experience. His areas of expertise include cross-functional management areas, profit and loss responsibility, marketing, sales management distribution management new product development and people development.

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