In my opinion, the strategic imperative for Amazon and Albertsons with their recent acquisitions is to reduce health care costs for their employees by negotiating better deals from healthcare providers, including pharmaceutical distributors. Amazon believes they can leverage their strengths in technology and distribution into health care and reduce health care costs for their employees, which of course has a major impact on their bottom line because health care costs are probably their fastest rising cost. Albertsons and Rite Aid both fill prescriptions, so it makes sense for a grocery store chain that owns pharmacies to buy a drug store operator. Albertsons will also own EnvisionRx, a PBM (Pharmacy Benefit Manager) with the Rite Aid acquisition, which is important because the PBM manages the supermarket chain's employee drug coverage. Albertsons does not own a PBM today, so this now gives them more control over their employee's pharmaceutical costs.

Amazon said the initial focus of their move into healthcare will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality, and transparent healthcare at a reasonable cost. As further evidence of their commitment to controlling employee health care costs, Amazon bought its own grocery chain when it purchased Whole Foods and is also reportedly interested in getting into the medical supply business and selling over-the-counter health products.

To me, these strategic moves say that Corporate America is tired of waiting for government to do anything about rising healthcare costs and they are going to take matters into their own hands, although in response to market demands, healthcare providers are transitioning to smaller more digital hospitals, same day surgical centers, outpatient clinics, free-standing emergency rooms, and micro-hospitals. Traditional hospital care is too costly and inefficient for many medical procedures. A national focus, led by corporations like Amazon and Albertsons on economics prevention and wellness, is driving new healthcare models

Jeff McHugh, MBA
Associate Professor, Crowell School of Business, Biola / Corporate Trainer / Leadership Development / Strategic Management