Amazon’s $3.9 billion acquisition of primary care company One Medical was finalized last week without a regulatory challenge. Consumer protection groups say the deal shouldn’t have been allowed to close, citing a number of concerns — some of which are shared by the Federal Trade Commission.
The agency, which reportedly had prepared a lawsuit to block the deal, could still sue to unwind the transaction farther down the road. Still, antitrust and M&A experts said that if regulators had found a reason to block the deal, they already would have.
“The government needs to be careful on where it’s meaningful to stir up anti-competitiveness and where it’s not. The head-fake on concerns here really raised a lot of eyebrows,” said Nathan Ray, healthcare M&A lead at consulting firm West Monroe.
Amazon’s strategy and data concerns
Amazon has made some bold investments in healthcare, but acquiring One Medical represents a new facet of the e-commerce giant’s healthcare strategy with the operation of physical medical clinics. The transaction brings more than 220 medical offices in 27 U.S. markets, a subscription telehealth service, an electronic health record and contracts with 9,000 employers under Amazon’s umbrella.
It’s a ripe time to disrupt the primary care market, according to analysts. An aging population, the growing prevalence of chronic conditions, rising healthcare costs and difficult care access are increasing demand for convenient, cost-effective access to healthcare close to the home.
That’s fueling a frenzy of deals in the space from acquirers ranging from CVS Health to Walmart to Best Buy, experts said.
“There’s a tremendous opportunity to make a profit,” said Natalie Schibell, a healthcare research director at market insights firm Forrester.
Analysts expect One Medical to continue operating independently within Amazon in the near term, as Amazon works to shore up back-end operations and connect the primary care company to its larger ecosystem of pharmacy and retail capabilities.
Amazon could take steps like connecting One Medical membership to Prime, its paid subscription service used by an estimated 168 million Americans, although it’s unlikely it will completely reinvent the provider’s business model, Ray said.
To be sure, consumer advocates have expressed concerns about the tie-up.
Consumer protection group Public Citizen urged regulators to block the deal after it was announced last summer, saying it had “grave concerns” about Amazon acquiring One Medical in a letter to regulatory groups.
Public Citizen said Amazon could leverage its dominant role in the online retail market to gain an unfair advantage in healthcare. By bundling One Medical and Prime membership, Amazon could create new revenue streams distinct from the provision of healthcare, such as targeting product advertising related to medical conditions, the letter says.
“What connects most or all of our concerns is the idea that Amazon can leverage its massive retail market power into the healthcare sector for nefarious purposes,” Rob Weissman, the president of Public Citizen, said in an interview. “It’s a very, very problematic merger, but the kinds of concerns it raises don’t line up perfectly with antitrust law.”
Another big concern revolves around Amazon acquiring, and potentially misusing, One Medical’s patient data.
Amazon already gathers a vast amount of consumer data through its online marketplace, Prime video and music platforms, Alexa voice assistant, Ring doorbells, fitness trackers and more. The company uses that data, including inferred health status, to direct individualized advertising and content suggestions.
“It’s a very, very problematic merger, but the kinds of concerns it raises don’t line up perfectly with antitrust law.”
Robert Weissman
President of Public Citizen
Acquiring One Medical’s actual health records from its 836,000 members could make those inferences a lot easier. That data is of “extraordinary value to a marketing company such as Amazon,” Public Citizen said.
Amazon has said it will comply with the Health Insurance Portability and Accountability Act, which governs what healthcare companies can do with protected health information. That means Amazon can’t share One Medical customers’ personal health data outside of One Medical for advertising or marketing purposes without their clear consent.
Still, Amazon could find workarounds like securing privacy waivers from One Medical consumers by offering a Prime discount, Weissman said.
”Every corporation is supposed to follow the law. That’s not the issue. You don’t get points for saying you’re going to follow the law,” Weissman said. “HIPAA protections are really hardcore, but there are a lot of ways to work around it. As a consumer, you should take zero comfort in that promise.”
Public Citizen’s concerns are shared by at least two FTC commissioners.
On Monday, Commissioner Alvaro Bedoya issued a statement co-signed by Commissioner Rebecca Kelly Slaughter calling out HIPAA’s limitations in protecting health data and urging Congress to enact more modern privacy laws.
“When you hear a company tell you that they will abide by HIPAA, it does not mean that they cannot use your data for other purposes,” Bedoya wrote. “When HHS proposed the Privacy Rule in 1999, I doubt that it had reason to anticipate that one day the world’s largest retailer — a company of profound technological sophistication — would amass people’s health information on this scale.”
Analysts said that data acquisition was likely a big driving factor for the deal. After linking One Medical's data with that from its other products and services, Amazon can analyze petabytes of healthcare data in the cloud and use the findings to better manage the health of One Medical’s Medicare population, build new products and pinpoint people with rare diseases to solicit participation in clinical trials, according to Forrester’s Schibell.
While concerns about data misuse are real, Amazon can mitigate them by implementing stringent security protocols and communicating privacy policies or consent for data use in clear language, Schibell said.
Amazon has a ways to go in gaining consumer trust. Over a third of U.S. adults say they’re not at all comfortable using Amazon for their healthcare needs, according to a Forrester survey from 2022 shared with Healthcare Dive.
The majority of U.S. adults aren’t comfortable using Amazon for healthcare
“If they blow it — if there's a major security breach, if they go about this the wrong way, and they're not transparent, if they don't appear to be serving the best interest of the consumer and population health — that's where you'll only recede on trust,” Schibell said.
Next steps for FTC
Regulatory experts said the FTC performed a stringent review of the merger, even requesting additional data from Amazon and One Medical. Among other concerns, regulators were looking for ways the deal could substantially eliminate competition, remove a head-to-head rival or create stronger incentives to leverage market power in a new market, according to Diana Moss, president of the American Antitrust Institute.
The FTC didn’t touch the deal after its review because it didn’t find a sensible theory to do so, Moss said, noting that the Biden administration has proven it’s willing to be aggressive and creative in interpreting statute to halt deals it views as anticompetitive.
“We have antitrust chiefs at the FTC and the DOJ that are very willing to push the envelope on bringing more cases, bringing more novel theories of competitive harm,” Moss said. “If you ever had an antitrust agency that was willing to bring more cases on more novel theories of harm, it would be the current enforcers without a doubt. That leads me to believe when they looked at Amazon-One Medical, they were absolutely looking at non-conventional theories ... If they weren’t able to patch together a novel theory of harm, then that tells you something.”
The FTC is continuing to monitor the deal. One agency official told Healthcare Dive that regulators still have competition concerns, because One Medical is a dominant player in the primary care space, and its acquisition by Amazon could allow it to grow in an anticompetitive fashion.
The FTC is also concerned about consumer protections, regarding patients potentially handing over sensitive medical information to One Medical, not expecting it to be used for other purposes such as marketing or advertising, the official said.
"If you ever had an antitrust agency that was willing to bring more cases on more novel theories of harm, it would be the current enforcers without a doubt."
Diana Moss
President, American Antitrust Institute
Still, circumstances would have to change for regulators to try to unwind the deal, such as proof that Amazon is systematically mishandling One Medical patient data, antitrust experts said.
In addition, unwinding a transaction is significantly harder than blocking one and challenges to consummated mergers are exceedingly rare.
“They’ll seek to unwind the deal only if Amazon acts totally contrary to its own interests and the fundamental philosophy of its own business,” which is a strong recognition of consumer sovereignty, said David Balto, an antitrust attorney and the former policy director of the FTC.
“I think at the end of the day Amazon has a compelling case that consumers are better off when they expand into various markets,” Balto said. “Certainly competitors in these markets don’t welcome Amazon stepping to the plate, but consumers at the end of the day may be better off.”
