Amazon Closes One Medical Acquisition but FTC Intervention Looms

Last July, Amazon made a big splash by announcing that it had signed an agreement to acquire One Medical for $3.9 billion. The strategy: Leverage One Medical’s network of boutique primary care and telehealth physician practices to build out and bolster Amazon Clinic, a secure portal offering patients personalized treatments and prescriptions for more than 20 different medical conditions ranging from headaches to hair loss provided by doctors and nurse practitioners (NPs) in 32 different states. (“Amazon Makes Third Attempt to Disrupt Healthcare Business,” Laboratory Industry Report, December 1, 2022).¹

On Feb. 22, Amazon officially announced that the deal has closed.² But the champagne popping must have been somewhat tempered by a potentially menacing presence: the US Federal Trade Commission (FTC). The agency has expressed concerns about the acquisition and Amazon’s business practices in general. While closing takes the risk of an injunction off the table, the FTC might yet intervene in the matter.

The FTC Turns Up the Regulatory Screws

It has been widely reported from sources including the Wall Street Journal, Bloomberg, and Seeking Alpha, that the FTC had stepped up scrutiny and that it was even considering an antitrust lawsuit to block the Amazon/One Medical deal amid concerns about its potential to throttle competition. The FTC’s apparent misgivings are anything but a bolt from the blue. Almost from the moment it took office, the Biden administration has gone out of its way to voice concerns about consolidation in health care. On July 9, 2021, the president issued an Executive Order (EO) calling on the FTC, Department of Justice, and other federal agencies to vigorously enforce the antitrust laws, especially in the healthcare markets. According to the EO, thanks to “unchecked mergers,” the 10 largest healthcare systems now control a quarter of the market.³

Nor is it surprising that Amazon would figure prominently in the Biden administration’s enforcement directive. The FTC has been investigating Amazon for several years. The new FTC probe reportedly focuses on the e-commerce behemoth’s wider and supposedly anti-competitive business practices, including the recent acquisitions of not only One Medical but also Roomba vacuum manufacturer iRobot Corp., that Amazon announced it was purchasing for $1.7 billion last August.⁴

The first inkling of trouble came in September when both Amazon and One Medical disclosed in their U.S. Securities and Exchange Commission (SEC) filings that they had received a request from the FTC for “additional information and documentary materials” in connection with the agency’s review of the proposed acquisition.⁵ According to Bloomberg, the FTC was contemplating filing an antitrust lawsuit against Amazon in federal court as early as this spring.⁶ Although it’s now too late to get an injunction barring the deal from closing, the FTC could still seek damages and even take steps to force Amazon to unwind the deal.

Meanwhile, Amazon Clinic remains in operation. Last summer, Amazon made the strategic decision to shut down its Amazon Care service providing virtual and limited in-person primary care services to employees of employer customers to focus on Amazon Clinic. The assumption was that Amazon would eventually be able to deploy the networks and assets it acquired from One Medical to build out Amazon Clinic with the hopes of eventually doing in the healthcare market what it did in retail. However, FTC scrutiny and litigation may yet thwart those plans and ultimately send Amazon back to the healthcare drawing board yet again.

References:

1. https://www.g2intelligence.com/amazon-makes-third-attempt-to-disrupt-healthcare-business/
2. https://www.aboutamazon.com/news/company-news/one-medical-joins-amazon-to-make-it-easier-for-people-to-get-and-stay-healthier
3. https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/
4. https://press.aboutamazon.com/2022/8/amazon-and-irobot-sign-an-agreement-for-amazon-to-acquire-irobot
5. https://www.sec.gov/Archives/edgar/data/1404123/000119312522216526/d379513dprem14a.htm
6. https://www.bloomberg.com/news/articles/2023-02-03/ftc-is-preparing-potential-antitrust-case-against-amazon?sref=XGjS8839

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Here’s a summary of the key M&A diagnostic deals that were signed or closed in February 2023:

Mergers, Acquisitions, & Asset Sales