Health-care execs and investors have a love-hate relationship with Amazon

Key Points
  • Venrock's new survey reveals what health experts are really thinking.
  • They believe Amazon will have a bigger impact than Apple or Google in the medical sector and are worried about hiring talent.
  • The Amazon partnership with Berkshire Hathaway and J.P. Morgan faces big hurdles, they say.
Amazon founder and CEO Jeff Bezos speaks at the new Amazon Spheres opening event at Amazon's Seattle headquarters in Seattle, Washington, U.S., January 29, 2018.
Lindsey Wasson | Reuters

The health-care industry is equal parts skeptical and excited when it comes to Amazon.

That's the takeaway from a new survey of more than 300 industry executives, policymakers and investors conducted by prominent health-tech venture capital firm Venrock.

Following a year in which Amazon gobbled up Whole Foods, forged a partnership with Berkshire Hathaway and J.P. Morgan to reduce health care costs and made clear its ambitions to distribute pharmaceuticals, there's little question that the e-commerce giant is out to disrupt at least some aspects of the multitrillion-dollar industry.

In Venrock's annual survey, Amazon came up repeatedly, in ways both positive and negative.

"Amazon is shaking up industries from retail to entertainment, and the latest sector in its sights is health care," Venrock said about the survey results.

When asked to choose the technology company that would make the most progress in health, the majority (51 percent) chose Amazon, followed by Apple (26 percent) and Google (18 percent).

But when polled about the most important health-care event of the past year, the Amazon partnership with Berkshire and J.P. Morgan ranked only third at 16 percent. More than half the respondents (51 percent) selected "survival of the Affordable Care Act," while 22 percent said the most significant event was CVS' $69 billion acquisition of Aetna.

These venture capitalists surveyed the health industry to find out what execs really think
Bob Kocher, Venrock

Tech companies will get into health but will they succeed?

Health experts remain skeptical that Amazon CEO Jeff Bezos, despite his lofty ambitions, can successfully take on the complex and challenging health-care market, which is notoriously difficult for newcomers.

Almost three-quarters of respondents (73 percent) said the Amazon partnership will "face substantial challenges and take lots of time."

Bob Kocher, a partner at Venrock who helped write the ACA, weighed in on the findings.

"There haven't been many outsiders (to health) that have really gained traction," Kocher told CNBC. He highlighted failed efforts like an employer consortium called Dossia, which shut down in 2016, and Google Health, an ambitious effort to aggregate consumer health information that shuttered in 2013.

In the poll, service-heavy businesses were viewed far more favorably than start-ups focused exclusively on bringing technology to the sector. The hottest companies, according to the results, are the emerging insurance plans, innovative primary care businesses and those tackling chronic conditions like diabetes and heart disease.

When asked about the most promising start-up that had the potential to go public this year, primary care group One Medical received the biggest vote of confidence at 34 percent, followed by health data company Health Catalyst at 31 percent and Grand Rounds, which offers virtual second opinions, at 23 percent.

Insurers, while attracting plenty of money and attention, are also a source of angst, with 69 percent of respondents saying they're concerned about bad news from Oscar, and 61 percent expressing concern about Clover Health.

Less uncertainty; more relief

In the realm of politics, Kocher said the prevailing view is that the Trump administration won't put much of its dramatic rhetoric into action. The survey indicated that health experts agree, with most saying they do not expect meaningful changes to drug pricing or an overhaul of the current insurance landscape.

That's giving them the confidence to buy, compete with and invest in new health technologies.

Technologies like artificial intelligence have potential in the coming years, but the most important solutions are focused on humans and cater to low-income, vulnerable populations that account for the vast majority of health-care spending.

"These are harder businesses, but our respondents felt that they're the meaningful ones," said Kocher.

Biggest challenges

The biggest concern of the respondents: hiring talent. With unemployment levels staying low, immigration under threat, and a shortage of medical professionals, many companies are struggling to fill their openings.

One-quarter of participants said they were "very concerned" about hiring, while fewer than 20 percent said they were concerned about regulatory changes or economic uncertainty.

"The lack of talent isn't just a problem the technology sector is facing," said Kocher. "It's getting harder to recruit in health care."

Kocher said all of his portfolio companies are having difficulty hiring engineers and most are paying hefty fees to headhunters.

"I hear this at every board meeting, at every company," he said.

You can check out the full report here.