WSJ: Amazon Looking to Reinvent Medical Supply Space

After sending a shock through the health space last month, e-commerce giant Amazon may be coming for the medical supply industry, too.

Amazon (Nasdaq: AMZN) has been inviting hospital executives to its headquarters in Seattle to gather information and test ideas for expanding Amazon Business, a business-to-business marketplace, to include medical supplies for outpatient locations, operating suites, and emergency rooms, The Wall Street Journal reported.

Amazon Business already sells a limited range of medical supplies in addition to office and industrial products. However, Amazon has recently sent employees to “a large Midwestern hospital system” where officials are testing whether they can use the marketplace to order health care supplies for approximately 150 outpatient facilities, WSJ said, citing a hospital official who is supervising the efforts.

The pilot is customized for the hospital system’s supply catalog, letting employees compare the prices that the hospital negotiates with distributors against those in Amazon Business, according to the official.

Amazon is not seeking to imitate the established models of the medical distribution sector, Chris Holt, leader of global health care at Amazon Business, told WSJ.

“We’re thinking about not how we can go mimic what’s already out there, but rather how we can rethink safety and security of anything clinical,” he he told the publication.

Amazon shook up the health care sector in January when it announced it was forming a nonprofit venture with JPMorgan Chase & Co. (NYSE: JPM) and Berkshire Hathaway Inc. (NYSE: BRK.A). In addition, it obtained approval to become a wholesale distributor from several state pharmaceutical boards, which WSJ noted is necessary to sell medical equipment to licensed professionals.

Some hospitals have been reluctant to purchase from Amazon Business, however, due to lack of control over purchases and shipping, and more limited options, WSJ said. Hospitals generally monitor purchases and transportation methods closely to ensure that goods arrive promptly and safely.

But a November 2017 report from Citigroup Global Markets found that  administration, marketing and shipping costs account for an estimated 20% to 30% of health care supply costs, and some medical supply companies have indicated concern about Amazon’s moves into the sector.

P. Cody Phipps, CEO of supply distributor Owens & Minor, Inc. (NYSE: OMI), said Amazon is “a formidable competitor in any distribution business” in a November 2017 earnings call.

Written by Maggie Flynn

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Maggie Flynn on Linkedin
Maggie Flynn
Business reporter at Aging Media Network
When she's not working, Maggie enjoys running, reading, writing and sports, in no particular order. Favorite things include murder mysteries, Lake Michigan and the Pittsburgh Penguins.

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