Amazon closes $3.9B One Medical deal as it builds out healthcare strategy

Amazon has closed its multibillion-dollar deal to buy One Medical to further its ambitions to offer medical services and expand its growing healthcare business to employers.

The tech giant officially announced the closing of the deal Wednesday morning. The news comes as The Wall Street Journal reported that the Federal Trade Commission (FTC) won’t sue in time to block the $3.9 billion deal, including debt.

An FTC spokesperson said the agency will continue its investigation of the merger, the WSJ reported.

FTC spokesman Douglas Farrar told the WSJ that the commission "will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical.”

Amazon announced in July plans to buy One Medical for $18 per share in an all-cash transaction valued at approximately $3.9 billion including the company's net debt.

The deal expands Amazon's reach into primary care as it now officially operates 188 clinics in 29 markets. The deal also gives Amazon rapid access to the lucrative employer market as One Medical works with 8,000 companies and has a trove of member health data.

One Medical, which is not yet profitable, launched in 2007 and markets itself as membership-based, tech-integrated, consumer-focused primary care platform.

At the end of 2022, One Medical had 836,000 members with the bulk of those, 796,000 among consumer and enterprise members and 40,000 at-risk members. The company reported 2022 revenue of $1.046 billion, up 68% from 2021 and fourth-quarter revenue came in at $274.2 million, up 19%, according to its 2022 earnings report.

By scooping up One Medical, Amazon also can gain a foothold in the Medicare Advantage market thanks to the company's acquisition of Iora Health in 2021. One Medical bought Iora Health, another primary care competitor focused on Medicare patients, in a $2.1 billion deal

In a press release, Amazon said One Medical is now offering annual memberships at the discounted price of $144 for the first year, the equivalent of $12 per month, to new customers. Memberships typically cost $199 per year.

“We're on a mission to make it dramatically easier for people to find, choose, afford, and engage with the services, products, and professionals they need to get and stay healthy, and coming together with One Medical is a big step on that journey,” said Neil Lindsay, senior vice president of Amazon Health Services, in a statement. “One Medical has set the bar for what a quality, convenient, and affordable primary care experience should be like. We’re inspired by their human-centered, technology-forward approach and excited to help them continue to grow and serve more patients.”

With Amazon's proposed deal to buy One Medical, the company is placing another massive bet on its healthcare strategy—to the tune of nearly $4 billion.

The company sees opportunities to make meaningful changes in healthcare, according to executives, based on Amazon's long tradition of innovating and investing in ideas to make it easier for consumers to get the products and services they need.

Amazon has been rapidly expanding its reach in the healthcare space, most notably in 2018 with its acquisition of online pharmacy PillPack. 

In 2019, the tech giant began piloting Amazon Care, which offered virtual and limited in-person primary care to employer customers but ended operations at the end of 2022. The online retailer has since rolled out Amazon Clinic, a virtual medical clinic that aims to treat common conditions like allergies, hair loss and skin conditions.

In a statement, Amazon CEO Andy Jassy said the integration of Amazon and One Medical can make the healthcare experience "easier, faster, more personal, and more convenient for everyone."

"If you fast forward 10 years from now, people are not going to believe how primary care was administered. For decades, you called your doctor, made an appointment three or four weeks out, drove 15-20 minutes to the doctor, parked your car, signed in and waited several minutes in reception, eventually were placed in an exam room, where you waited another 10-15 minutes before the doctor came in, saw you for five to ten minutes and prescribed medicine, and then you drove 20 minutes to the pharmacy to pick it up—and that’s if you didn’t have to then go see a specialist for additional evaluation, where the process repeated and could take even longer for an appointment," Jassy said.

According to regulatory filings, there was at one point a bidding war between Amazon and retail pharmacy giant CVS to buy One Medical.

There's been a flurry of activity in the primary care market in the past two years as CVS, rival Walgreens and retailer Walmart have all been making major moves to expand into providing medical services. 

CVS plans to buy Medicare-focused provider Oak Street Health in an all-cash deal valued at $10.6 billion, or $39 per share. Primary care player VillageMD, which is backed by rival Walgreens, plans to shell out nearly $9 billion to pick up medical practice Summit Health, which owns urgent care clinic chain CityMD. That deal also included a major investment by insurer Cigna.