Amazon's $3.9 billion acquisition of primary care company One Medical closed last week without regulatory challenges. Consumer protection groups said the deal should not have been allowed to close, citing a number of concerns—some of which align with the Federal Trade Commission's (FTC) concerns.

The FTC was reportedly prepared to sue to block the deal but could still sue in the future to unwind it. However, antitrust and merger experts said that if regulators had found grounds to block the deal, they should have already acted.

"The government needs to carefully judge which areas are worth raising competition concerns and which are not. This bluster over concerns has indeed raised many questions," said Nathan Ray, healthcare M&A lead at consulting firm West Monroe.

Amazon's strategic and data concerns

Amazon has made some bold investments in healthcare, but the acquisition of One Medical represents a new level in the e-commerce giant's healthcare strategy—venturing into operating physical medical clinics. The deal brings One Medical's more than 220 medical offices across 27 U.S. markets, subscription-based telehealth services, electronic health record systems, and contracts with 9,000 employers under Amazon's umbrella.

Analysts believe this is the right time to disrupt the primary care market. An aging population, rising rates of chronic disease, increasing healthcare costs, and difficulty accessing care have all increased demand for convenient, cost-effective medical services close to home.

Experts say this is driving a wave of deals in the sector, with acquirers including CVS Health, Walmart, and Best Buy.

"There is a huge profit opportunity here," said Natalie Schibell, research director for healthcare at market insights firm Forrester.

Analysts expect that in the short term, One Medical will continue to operate independently within Amazon, as Amazon works to strengthen its back-end operations and connect the primary care company with its larger pharmacy and retail ecosystem.

Ray said Amazon could take steps such as bundling One Medical membership with Prime (its paid subscription service, estimated to have 168 million U.S. users), but is unlikely to completely overhaul the healthcare provider's business model.

Of course, consumer advocates have expressed concerns about this merger.

Consumer protection group Public Citizen urged regulators to block the deal after it was announced last summer, saying in a letter to regulators that it was "deeply concerned" about Amazon's acquisition of One Medical.

Public Citizen noted that Amazon could leverage its dominant position in the online retail market to gain an unfair advantage in healthcare. By bundling One Medical and Prime memberships, Amazon could create new revenue streams unrelated to healthcare provision, such as advertising products targeted at medical conditions.

"At the core of most of our concerns is that Amazon could bring its enormous retail market power into healthcare with bad intentions," Public Citizen President Rob Weissman said in an interview. "This is a very, very problematic merger, but the concerns it raises do not fit neatly within antitrust law."

Another major concern revolves around Amazon's access to and potential misuse of One Medical's patient data.

Amazon already collects vast amounts of consumer data through its online marketplace, Prime Video and music platforms, Alexa voice assistant, Ring doorbells, fitness trackers, and more. The company uses this data, including inferred health conditions, to target personalized ads and content recommendations.

Acquiring the actual health records of One Medical's 836,000 members could make these inferences even easier. Public Citizen said this data would be of "extraordinary value to a marketing company like Amazon."

Amazon has said it will comply with the Health Insurance Portability and Accountability Act (HIPAA), which governs how healthcare companies handle protected health information. This means Amazon cannot use One Medical customers' personal health data for advertising or marketing purposes without their explicit consent.

Even so, Weissman said Amazon could still find workarounds, such as offering Prime discounts in exchange for privacy waivers from One Medical consumers.

"Every company should comply with the law; that's not the issue. You don't get points for saying you will comply with the law," Weissman said. "HIPAA's protections are indeed strict, but there are many ways to circumvent them. As a consumer, you should not take any comfort in that promise."

Public Citizen's concerns are at least shared by two FTC commissioners.

On Monday, Commissioner Alvaro Bedoya released a statement joined by Commissioner Rebecca Kelly Slaughter, pointing out HIPAA's limitations in protecting health data and urging Congress to enact more modern privacy laws.

"When you hear a company say they will comply with HIPAA, that does not mean they cannot use your data for other purposes," Bedoya wrote. "When HHS proposed the privacy rule in 1999, I doubt it had reason to anticipate that one day the world's largest retailer—a highly sophisticated technology company—would collect people's health information on this scale."

Analysts say data acquisition could be a major driver of the deal. Forrester's Schibell noted that by linking One Medical's data with data from Amazon's other products and services, Amazon could analyze petabytes of healthcare data in the cloud and use the findings to better manage One Medical's Medicare population health, build new products, and identify patients with rare diseases to invite them to participate in clinical trials.

While concerns about data misuse are real, Schibell said Amazon could alleviate them by implementing strict security protocols and communicating privacy policies or data-use consent in clear language.

Amazon still has a long way to go in winning consumer trust. According to a Forrester 2022 survey shared with Healthcare Dive, more than a third of U.S. adults said they would be completely uncomfortable using Amazon to meet their healthcare needs.

"If they mess up—if there's a major security breach, if they act in the wrong way and aren't transparent, if they don't appear to be serving the best interests of consumers and population health—that will only push trust further down," Schibell said.

The FTC's next steps

Regulatory experts say the FTC conducted a rigorous review of the merger, even requiring Amazon and One Medical to provide additional data. Diana Moss, president of the American Antitrust Institute, said regulators were looking for evidence that the deal could substantially lessen competition, remove a direct competitor, or create stronger incentives to leverage market power in a new market.

Moss noted that the FTC's decision not to intervene after its review was because it did not find a reasonable theory. She emphasized that the Biden administration has shown a willingness to be aggressive and creative in interpreting regulations to block deals it deems anticompetitive.

"The antitrust leadership at the FTC and DOJ are very willing to push more cases, more novel theories of competitive harm," Moss said. "If you've ever had an antitrust agency willing to bring more cases based on more novel harm theories, it's certainly the current enforcers. That leads me to believe that when they reviewed the Amazon-One Medical deal, they were absolutely considering non-traditional theories... If they couldn't piece together a novel harm theory, that says something."

The FTC is still monitoring the deal. An agency official told Healthcare Dive that regulators still have competition concerns because One Medical is a dominant player in primary care, and its acquisition by Amazon could allow it to grow in anticompetitive ways.

The official also said the FTC is equally focused on consumer protection issues—namely, that patients may have given sensitive medical information to One Medical without expecting it to be used for other purposes such as marketing or advertising.

Even so, antitrust experts say that for regulators to attempt to unwind the deal, circumstances would need to change, such as evidence that Amazon systematically mishandled One Medical patient data.

Moreover, unwinding a completed deal is much harder than blocking one, and challenges to already-consummated mergers are extremely rare.

"Only if Amazon completely acted against its own interests and the basic philosophy of its business would they seek to unwind the deal," said David Balto, a former FTC policy director and antitrust attorney. "I think ultimately Amazon has a compelling argument: when they expand into various markets, consumers benefit. Of course, competitors in those markets don't welcome Amazon's entry, but ultimately consumers may be better off."