Amazon sure knows how to set an industry on edge.
The Wall Street Journal reported Tuesday that Amazon wants to become a major medical supplier, but the company has yet to make any healthcare-related announcements beyond its new healthcare venture with Berkshire Hathaway and JPMorgan Chase that was unveiled late last month. The company already offers a range of professional medical products through its business-to-business marketplace, Amazon Business.
Analysts probed Amazon executives for information about its investments in healthcare during the company's fourth-quarter earnings call Feb. 1, but company officials were fairly tight-lipped about it.
"On new businesses or expansion of categories, as you discussed, I would not talk to anything that's not been publicly announced, but on some of the ones you mentioned, they are underway and are continuing," said Brian Olsavsky, CFO at Amazon, in response to a question from Morgan Stanley's Brian Nowak about investment plans in new areas, including healthcare.
Medical device manufacturers probably have less to worry about with Amazon's healthcare entry than suppliers that simply buy and then resell products manufactured by third parties, according to Needham & Co.'s Mike Matson. In a report he published Tuesday, Matson said Amazon's model may work for lower-tech products, but is unlikely to work with higher-tech products.
He defined lower-tech products as lower priced (often single-use) items that do not require service and are typically used without a sales rep present. These products are already commonly sold through distributors such as Owen & Minor, the analyst pointed out, while higher-tech products are usually sold directly by the manufacturer.
"Amazon would simply represent another distribution channel for lower-tech products," Matson said.
Competing with Amazon could impact medical device pricing, but Matson noted that pricing in the industry has been under pressure for years with products typically seeing price declines between 1% and 10% a year as hospitals have become much savvier about negotiating device pricing, and as price visibility has increased.
"Additionally, physicians are still influential in selecting products, particularly higher tech ones, and price isn't a top consideration. As a result, we don't expect Amazon to accelerate price declines," Matson said.
Major medical device companies that do generate a portion of their sales from lower-tech products include Medtronic, Stryker, and Teleflex, and Conmed.