Last year, Amazon entered into a partnership with Berkshire Hathaway and JPMorgan Chase & Co. The company also bought Pillpack, an online pharmacy. Both initiatives aim to offer good care at a low price. This step arouses unrest: the share prices of several companies in the med tech and pharmaceutical industries fell. Has a new disruptive healthcare player emerged? And what will the effect be on the Netherlands?
By entering into a partnership with Berkshire Hathaway and JPMorgan Chase, Amazon is circumventing the health insurer. The purchase of Pillpack and the plans to open clinics indicate that the ambitions of the web giant go beyond just financing care. If Amazon interferes with technological developments in the healthcare market, the impact will be vast. It fits in with the strength and motivation with which the company has also entered the supermarket sector, for example.
Opportunities for digital platforms in the Netherlands
In other markets, we see tech parties that bring supply and demand together on a single digital platform emerge. This excludes intermediaries, as Airbnb and Netflix are already doing.
Does Amazon have this healthcare role in mind and is their plan to take it outside the US? There are many intermediaries active in the Dutch healthcare sector, for example in health insurance, pharmacy or medical devices. For Amazon and other online disruptive players, there are plenty of opportunities to integrate and digitise the role of these intermediaries.
Exciting, because they will significantly increase the competitive pressure in the healthcare market. A platform offers many advantages in terms of ease of use and experience. It also makes the offer transparent, which lowers prices. And that is the – so far only – goal communicated by Amazon, Berkshire Hathaway and JPMorgan Chase.
Getting a foothold is difficult
Before a digital player like Amazon gets a foothold in the Netherlands, it will have to overcome many hurdles. Our complex financing structure leaves little space for new business models. The patient is not or hardly willing to pay extra for new services, on top of the premium. This is a major entry barrier for new initiatives.
Health care systems across the globe vary considerably, making it more difficult for platforms to scale up across borders. Crucial to the success of digital platforms is the low cost of an additional user. With different systems, this success factor does not seem to work. Truly successful digital players need a minimum scale that is larger than the Dutch market alone.
To be successful, digital disruptive parties use data and algorithms. In Dutch healthcare, mass data and especially medical data are well protected by laws and regulations. Previously, the national EPD had already failed in the Senate for privacy reasons. Technological innovations in data exchange offer a solution, but are still in pilot phase and not widely implemented.
Finally, healthcare is a service par excellence for which human contact is essential. There is a relationship of trust between doctors, pharmacists and their patients. This can be supported, but it is difficult to replace it entirely by a digital platform of an American tech giant.
Pressure on these barriers is increasing: breakthroughs are imminent
However, we cannot assume that a party like Amazon will be held back by this. Health insurers are increasingly looking for innovative ways to reduce healthcare costs. This may change the payment culture among patients, making them more sensitive to the supply of new parties. Progress is also being made on digital data exchange. This will hopefully be further accelerated by the obligation to share patient data digitally, recently announced by Minister Bruins.
As a result of these developments, the aforementioned stumbling blocks for tech players are becoming less threatening. The current healthcare market can see this as an opportunity for further development. Tech players are successful because in their business operations, they put their customers first. They offer more convenience and excellent service. Ask yourself whether your organisation still meets the needs of the patient or customer to the maximum. Identify the steps you can take to match this level, perhaps in collaboration with successful tech players.
Wondering how (digital) disruptions can take your organization to the next level? At IG&H we are happy to think along with you.
By: Roos Blankena (r.blankena@igh.nl) and Linda de Jong (l.dejong@igh.nl).