With Amazon making headlines for cutting hundreds of jobs across One Medical and Amazon Pharmacy, one industry expert said there could be a takeaway that Amazon is getting out of healthcare. But that would be an “overly simplistic” conclusion.
“The company did make a series of acquisitions, and I would expect it to some extent as they determine where there are overlaps amongst the various teams hired in or acquired in,” said Christina Farr, an investor at OMERS Ventures, in an email. “I would also imagine that Amazon is investing in software that would automate some functions, resulting in some downsizing. The company is also making cuts across the board, while it is doubling down in other areas. I remain intrigued by Amazon’s potential in the sector.”
Seattle-based Amazon has eliminated “a few hundred” healthcare jobs, the company confirmed Wednesday to MedCity News. The news was first broken by Business Insider Tuesday. It comes after several healthcare moves by the retail giant over the last couple of years, including its nearly $4 billion acquisition of primary care provider One Medical; its introduction of Amazon Clinic, a direct-to-consumer telemedicine service; and its launch of RxPass, which offers more than 50 generic drugs for $5 a month to Prime members. In November, Amazon linked its Prime membership with One Medical. But the company has also shuttered several healthcare businesses, including Amazon Halo, Amazon Care and Haven.
The job cuts are a result of restructuring as the company moves along its healthcare efforts, according to Neil Lindsay, senior vice president of Amazon Health Services.
“We’re seeing very strong momentum and positive customer feedback across our health care offerings,” Lindsay said in a statement to MedCity News. “As we continue our mission to make health care simpler for customers, we’re realigning some resources to help accelerate our efforts to deliver the best experience for our patients, customers, and members. Unfortunately, these adjustments will result in the elimination of a few hundred roles within Amazon Pharmacy and One Medical.”
In a memo sent to employees Wednesday and shared with MedCity News, Lindsay pushed back against any thoughts that this could signal trouble for Amazon’s healthcare business.
“As often happens with changes like this, some pundits may speculate that we’re eliminating roles because our health care business is underperforming—don’t believe this speculation,” he said. “The most successful businesses, those that deliver the best experience for their customers, typically go through phases of reorganization or realignment to put energy where they need it most. You have likely seen many healthy businesses both inside and outside of Amazon reprioritizing recently, leading to role reductions in some areas and additions in others. That’s what this is.”
But according to another industry expert, there have been “some headwinds setting the stage” for these job cuts.
“Amazon has previously cited issues with provider recruitment for One Medical and had tempered expectations that clinic growth would be dependent on market conditions,” said Kate Festle, a director in West Monroe’s healthcare M&A group. “Provider supply constraints could have slowed clinic expansion and this is a right-sizing to reflect a flatter growth arc. This also follows integration of One Medical into the Prime subscription model and they could be re-calibrating costs to adjust against their subscription volumes.”
Festle added that this isn’t just an issue at Amazon. Players like Walgreens are also “taking a harder look at the unit economics of their primary care footprint.” VillageMD, which is backed by Walgreens, is closing several clinics.
Amazon is supporting the employees affected by the job cuts with financial support, benefit continuation and career assistance, Lindsay stated in a Tuesday memo sent to employees and shared with MedCity News.
He also told MedCity News that the company will continue hiring providers and investing in technology and teams.
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