Amazon and Apple getting big into healthcare won't be easy says ex Apple CEO John Sculley
It won't be super easy for Apple (AAPL) and Amazon (AMZN) to make big pushes into the healthcare space.
That is according to former Apple CEO John Sculley.
"It would make sense for Amazon to get into healthcare [PBM] industry," Sculley told TheStreet in an interview when asked about rumors of Amazon looking to enter the pharmacy industry. "The challenge for Amazon is not that they don't have the technology prowess, it's the complexity of the domain of healthcare."
Sculley explained that it would be logical for Amazon to get into the supply chain management side of the business -- the only question being does it partner with someone or build out a drug supply chain of its own.
Rumors have been building that Amazon may also venture into the pharmacy business. In May, CNBC reported that Amazon hired a general manager to lead its push into the healthcare market, after holding at least one annual meeting to discuss its plans in this area.
A new report from CNBC said Amazon is finalizing its pharmaceutical plan. Amazon recently expanded its Prime Now service in Japan to include drug and cosmetic sales and has also formed a Professional Health Care Program to regulate the sale of medical supplies and equipment in the U.S.
Amazon is no stranger to disruption, having revolutionized the e-commerce, cloud computing, logistics and artificial intelligence markets, among others, since its inception in 1994. Wells Fargo said Amazon could have the same effect on the pharmaceutical industry by providing downward pressure on prescription drug pricing. On top of that, the firm added that Amazon's low prices, same day or next day delivery and free shipping would likely spur competition among distributors and pharmacies.
As for Apple, which has been rumored to have shown interest in buying a health clinic provider, Sculley said such a move would come with challenges as well.
Sculley knows a thing or two about the healthcare industry. He is an investor and chief marketing officer at upstart pharmacy benefit manager RxAdvance. "I think RXAdvance is the most interesting company I have worked at since Apple -- we are disrupting the most vulnerable and expensive area of the market." Sculley said he expects RxAdvance to boast $2 billion in contracted revenue by 2018 and $10 billion by 2020.
Apple has long dabbled in healthcare innovation, most significantly with its Apple Watch apps to monitor health. To tech heavyweights like Alphabet, Inc, Microsoft Corp and more recently Apple, the healthcare industry's shortcomings, such as declining productivity and a shortage of physicians, can be a goldmine for investment.
Healthcare retail clinics, for instance, emerged more than a decade ago to offer customers the convenience of getting minor treatment without seeing a doctor. Instead, they can visit their local CVS Health CVS or Walmart Stores, Inc.
Working parents can take their sick child to a retail clinic on the way to work and walk out in 30 minutes instead of spending hours in a doctor's office. But while the number of retail clinics increased in the last decade, it has yet to prove to be both economically viable on a mass scale or disruptive in how patients receive treatment.
This means that to truly penetrate the trillion-dollar healthcare market, Apple has its work cut out.
"Very successful people have gone into healthcare and failed," said Tom Charland, the founder and CEO of Merchant Medicine, a firm that tracks retail health clinics. "We've seen it before with Microsoft and Steve Case of AOL," he added, pointing to Microsoft's unsuccessful bid to digitize the health record system and Case's failed health social-network startup, Revolution Health.