Dear Mr. Bezos,
Leave rationalizing the market for organic foods to one of your sidekicks, and tinkering with driverless cars to a crowded field of tech companies. You are needed to disrupt the health care sector. Only you have the vision, ambition, capital, and computing power this mission requires. Google comes close, but does not have your superb delivery system, essential for this mission.
Surely, it is one worthy of a giant. Health care is a huge sector of the economy, comprising close to 18% of US GDP. Roughly one out of every ten American workers is employed in this sector. And it is clearly one in which market failures are most rampant. No wonder we pay more for health care and get poorer outcomes than any other industrialized nation. We need you to do to health care providers what you did to book publishers, bookstores, and brick and mortar retailers. Challenge their old ways of doing business, by providing a much more rational way of doing business.
You need not undertake this out of altruism, though you will render a major social good. This sector is rife with inefficiencies, waste, and fraud. You can readily cut the costs to consumers, to the public, and still have a healthy stream of profit.
Amazon will need to start by opening a distinct legal front—let’s call it Amazon Health. One major reason is that the law considers information about people’s health more sensitive and hence deserving of a much higher level of privacy protection than data about typical consumer purchases. Second, liabilities run higher in this sector. And having a distinct front will call attention to the fact that Amazon is already selling many health products, a fact most people are unaware of. When I ask people where they get aspirin or an oxygen concentrator, none mention Amazon. But once you hang out a new shingle, Amazon Health, people will find getting health care products from you highly attractive, given you offer them at a discount and, above all, with a much better delivery system than others provide.
Pharmacies are basically in the brick and mortar stage of business. Although they accept prescriptions from physicians by email or fax, patients are expected to come to their site, queue up, and collect their medications. This is a hardship on incapacitated patients and their family members, and, when the stores are packed or the weather inclement, for most everyone else too. Amazon already has a super delivery system that could readily be adapted to deliver medications.
Pharmacists may well tell you that the patients will lose the personal touch and counseling they provide. However, Amazon will not put pharmacies out of business, any more than it did bookstores. Those who seek a personal touch will still be able to find brick and mortar pharmacies and face-to-face customer service. However, these days very little counseling takes place. Most patients would love to get their prescriptions (and other medical supplies) together with books and many other goodies from Amazon.
Amazon can increase the attraction of its new, online pharmacy by providing a much more reliable stream of information to those who make it the prime source of their medications. Currently, physicians and pharmacies have computerized programs that alert them when a patient is prescribed medications that conflict with each other. Since few comparable programs are available to the public online, most patients have no choice but to rely on the pharmacies’ software.
Unfortunately, these programs are not working well. A study of pharmacies in 2008 and 2009 “found that comprehensive system improvements are essential to improve the manner in which pharmacy identification systems identify potential DDIs [drug-drug interactions].” The pharmacies missed about one in seven clinically significant interactions, and the software with the worst performance missed 77%. In 2016, investigative reporters went to 255 pharmacies and tried to fill prescriptions for two drugs which, when taken together, could result in a fatal interaction. In 52% of the cases, the reporters received no warning. Moreover, patients are not receiving alerts when the FDA finds that a new drug is not as safe or effective as previously expected. For example, between 2004 and 2011 researchers counted 91 Class I drug recalls, which are the most serious type. However, 18 of these recalls were not included in either of two FDA notification systems. Given Amazon’s skill in processing such data, it could readily provide warning information and alerts.
Congress enacted a law that bans Medicare from negotiating drug prices with the pharmaceutical industry. However, since Amazon Health would act as a private corporation dealing with other private corporations, it is hard to imagine Congress could prevent it from getting favorable prices for its patients.
A frequently cited statistic states that roughly one third of health care spending in the United States is unnecessary. This unnecessary spending comprises both inappropriate and ineffective procedures. For instance, routine colonoscopies are not recommended for those over 75, and for those over 85 they are not recommended for any reason. However, some older patients are still undergoing colonoscopies, and doing so too often, according to a study published in JAMA Internal Medicine.
Furthermore, reports show that patients needlessly undergo surgery when there are suitable non-surgical options. For instance, clinical trials have demonstrated that spinal fusion surgery is no more effective than non-surgical treatments for back pain. However, the rate of this surgery continued to increase after the trial results came out, and did not decrease until some insurers stopped covering the surgery, according to the New York Times.
“Too often, a stay in the hospital leads to unnecessary procedures, screenings and medications that do little for patients—other than driving up anxiety and costs” writes Melanie Evens in the Wall Street Journal. The annual waste for 11 different types of medical services alone was estimated to be over $1 billion, and the annual cost of unnecessary surgeries, screenings, and tests for those on Medicare was estimated at $1.8 billion.
To reduce health care costs, one can hardly imagine a better place to start than to use the trillions of pieces of information already in the database of Medicare to assess all procedures for safety and effectiveness. Amazon can then analyze these data to determine when safe and effective procedures are used inappropriately. Moreover, this can be done while taking into account differences in age, social background, and various other background conditions of the patient.
Theoretically the Department of Health and Human Services is tasked with carrying out such evaluation studies, but does them on a small scale, reportedly due to lobbying pressure to protect health care reimbursements. Other such studies are carried out by a variety of business and even some not for profit. However, these leave much to be desired. To give but one example, it very difficult for one to find out whether the vitamin supplements they take are of great benefit, a waste of money, or quite harmful. The FDA gave up on this mission because of political pressure. A private corporation should be freer to proceed.
Amazon may buy and consolidate some of those that are in this business and give the others the kind of competition that improves outcomes, as you did to other sectors of the consumer market. Amazon has the computing power and analytical skills to carry out such evaluations on a massive and continuous scale. Such diagnostics would be of public service but there is also a considerable market for this kind of evaluation, by insurers, hospital managers, and consumers.
60 Minutes found that abuse of Medicare is an even bigger industry in South Florida than the drug trade. Crooks buy patient lists, and then bill Medicare for expensive interventions that never took place. When they are caught they close their storefront, open a new one, and repeat. It is estimated that “improper payments” cost Medicare $60 billion in 2016. Amazon, by providing proper accounting, can help reduce the drain on public funds.
The main catch
I can practically hear Bezos’s advisers pleading with him not to go there and to stick to consumer goods. The reason is that in disrupting the heath care sector, Amazon will have to take on much more powerful players than bookstores, publishers, and even big name retailers. Major pharmaceutical corporations, known as ‘Big Pharma’, are not likely to welcome the kind of pressure Amazon has put on its suppliers. Medical specialists, who make their living by being paid for each procedure, will fight to ensure that their procedures are not deemed useless or worse. Health insurers, who would seem natural allies for a drive by Amazon Health to reform and rationalize the health care sector, in the past have been at least reluctant to take on special interests, and rather increased premiums.
The government has been unable to face up to these powerful interest groups, and we have decades of evidence that it has been unable to rationalize health care. If there is a private corporation that can do it, Mr. Bezos, none seems to have more potential than yours. Granted, Mr. Bezos, even you cannot bring rationality to this high and complex sector that is as poorly structured as our health care sector currently is. However, you can make a major difference, one at least as important as upending the book and even organic food market.