Amazon projected huge losses from its healthcare business in 2024, but strong sales growth, internal document reveals

Amazon’s healthcare business lost $1.28 billion in 2023.

Late last year, Amazon projected its healthcare businesses would lose more than $1 billion in 2024, according to an internal planning document obtained by B-17.

This $1.08 billion loss forecast was an improvement from the year before, when Amazon lost $1.28 billion in its healthcare segment, the document showed.

There was more-positive news in the document, which is from December: The tech giant expected healthcare revenue to jump almost 30% to over $3 billion in 2024, a sign of strong demand for newer offerings such as Pharmacy services.

Overall, the 10-page document revealed Amazon wrestling with a challenging and complex new sector, while making tough decisions and steady progress. Although the company doesn’t break out financials on the healthcare business, investors will be looking for signs of success when it reports results on Thursday.

“We are pleased with the strong progress that Amazon Health Services is making to drive growth, build a sustainable cost structure, and most importantly, make quality health care better, easier, more accessible, and more transparent for patients,” a company spokesperson told B-17.

Forecasts from December

Amazon started expanding into healthcare several years ago, most notably with the acquisitions of the online pharmacy PillPack in 2018 and the primary-care provider One Medical in 2022, spending a combined $4.9 billion on those two companies.

Tech companies have long tried to expand into healthcare, with mixed results at best. Amazon’s experience has been equally fraught.

According to the December document, One Medical was projected to lose $506 million in 2024, down from a loss of $597 million in 2023. That 2024 projection drops to $341.7 million when certain amortization costs are excluded.

Amazon Pharmacy was expected to lose $420.2 million this year, down from a $515.2 million loss in 2023.

Amazon forecast overall healthcare revenue to climb 28% to $3.16 billion in 2024, according to the document from December. That was mostly thanks to Amazon Pharmacy, which was projected to generate $1.81 billion in 2024 sales, a 45% surge. One Medical, meanwhile, was anticipated to grow revenue by 10% to $1.34 billion.

The “Other Health Services” segment, which includes telehealth services, was expected to generate just $6.1 million in revenue but a whopping $152.4 million in operating losses in 2024.

The document was created in December and is marked “Amazon Confidential.” It’s from the second phase of the company’s operating plan for this year. The numbers may have changed since then as the year has progressed and Amazon has taken several steps to try to improve its healthcare business, including layoffs and other cost cutting. Still, the projections from this document likely won’t have changed in a meaningful way, a person directly involved in the business plan said. This person asked not to be identified discussing private matters.

“These figures are incorrect, and do not accurately reflect the financial performance of Amazon Health Services,” the Amazon spokesperson told B-17, describing the December planning document as an “incomplete draft.”

Speaking to the 2024 projections, specifically, the Amazon spokesperson said: “Amazon Health Services teams have not yet finalized 2024 year-end expectations, but those figures are also incorrect.”

Still, narrowing healthcare losses are an encouraging sign for Amazon, which has been focused on improving its overall profitability. CEO Andy Jassy has been on a cost-cutting crusade, resulting in record layoffs and a series of shuttered projects. One Medical, for example, was told to cut projected losses during last year’s planning stage.

“2024 will be a year of sharpened focus on economically viable growth, improved productivity, adopting mechanisms that ensure better execution, and integrating with Amazon where doing so provides leverage,” the document from December said.

‘Accelerate the path to profitability’

Amazon has put the different parts of its healthcare business, such as Pharmacy and One Medical, into a single group, led by Neil Lindsay, the senior vice president of health and brand.

The mission of this new group is to “make it dramatically easier for customers to find, choose, afford, and engage with the products, services, and professionals they need to get and stay healthy,” the December document said.

One way of pursuing this mission is to make it easier for customers to “Get Care,” the document said. As part of this, Amazon launched a new telehealth marketplace called Amazon Clinic in 2022, which recently rebranded to Amazon One Medical Pay-per-visit. One Medical also gives access to in-person visits at offices across the country.

More recently, Amazon has been focused on “how to strengthen the financial viability and accelerate the path to profitability” of its healthcare business, this document said.

A key area is reducing One Medical’s fixed costs, such as head count and management layers. It also wants to improve cost of care by cutting the per-visit cost from $372 to $322 and increasing average vists per provider from 1,456 to 1,597, according to the document.

In February, Amazon chopped hundreds of jobs at Pharmacy and One Medical, while reshuffling teams to further save money. One Medical also faced a setback when it lost a major enterprise customer, Google, this year.

Better pricing on GLP-1 drugs

Additionally, Amazon Pharmacy has been able to improve its vendor terms on GLP-1 drugs for treating obesity and diabetes, allowing for better pricing, the document said. Amazon healthcare is slowing investments in smaller initiatives by delaying hiring for certain projects and reducing contractor spend, it added.

Amazon is still making investments for growth in healthcare, according to the document. One area of investment is back-end technology to improve the customer experience. It’s upgrading the sign-up process, such as insurance-card-capture technology, and simplifying the linking between One Medical and Amazon Pharmacy accounts. It’s also looking to build better member navigation and employee workflows for One Medical’s virtual-care service, as well as stronger security measures.

“We are aware that simplifying business priorities, reducing fixed cost overhead, and assertively addressing cost to serve is necessary to support accelerated growth,” Amazon said in the document.