More on Supply Chain

Majority of providers support Amazon's disruption to medical supply business

Amazon is seeking to disrupt the traditional healthcare supply chain by selling supplies from bandages to hip replacements to syringes.

Susan Morse, Managing Editor

The majority of providers are supportive of Amazon's disruption of the medical supply business, according to a recent study by Reaction Data.

Amazon's ability to offer products at low cost and a quick turnaround are two reasons 62 percent of hospital executives are supportive of Amazon's plan. Another 26 percent said they were neutral and only 12 percent said they were unsupportive.

A major concern is that deliveries need to be 100 percent accurate. 

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Amazon would have to keep products up to the same current specifications and would have to keep the supply consistent.

But if Amazon can keep prices down and provide a quick turnaround, the disruption will be positive, the study said.

One vice president of supply chain said, "Healthcare is ripe for the next level of disruption from care delivery to supply chain to funding."

A director of Materials Management was cautious, saying that unless Amazon was going to honor a group purchasing organization contract it wouldn't be a good option for GPO compliant facilities.

Only 11 percent thought Amazon would be unsuccessful.

"Interesting how non-medical folks think they know better than the experts." Amazon should focus on "food and goods and leave the medical supplies alone," one supply chain VP said.

Respondents were divided on whether Amazon should provide only commodities or also include surgical supplies such as catheters and pharmaceuticals. Amazon recently pulled back on pharmacy distribution.

Amazon is seeking to disrupt the traditional healthcare supply chain by selling supplies from bandages to hip replacements to syringes, according to the study. The online giant plans to allow hospitals and clinics to shop for supplies directly, avoiding a middle man distributor.

Amazon's model would bypass traditional contract negotiations hospitals and clinics have with distributors and manufacturers.

The study's responses were CEOs - 29 percent, directors of materials management -26 percent, directors of operations - 24 percent and directors of finance -15 percent.

At least one CEO asked if there would be an Amazon Prime for healthcare membership or whether shipping and other member benefits would be provided.

In February, Amazon rolled out a pilot program with a large Midwestern hospital system for Amazon Business to fulfill supplies for about 150 outpatient facilities, according to The Wall Street Journal.

The industry has been keeping a close eye on Amazon because of its ability to manage costs and tap into behavior and buying patterns to present a customer-centric model, as healthcare is striving to do.

Earlier this year, Amazon, Berkshire Hathaway and JPMorgan Chase announced they would partner on a nonprofit healthcare company focused on technology solutions. The companies are seeking a CEO, they announced last month, but the direction the partnership will take remains unclear.

Twitter: @SusanJMorse
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