Amazon Is Already Reshaping the Health Care Industry

Not every American will have both their medical and drug benefits managed by the same company. But many more will in the years to come. These integrated companies have more information about their customers and more ability and incentive to manage the totality of their health spending.

UnitedHealth is already all-encompassing, with its continuing investment in everything from ambulatory surgery centers to physician groups. CVS and Aetna — which will add retail pharmacies and primary care clinics to the equation — could have an unprecedented role in patient lives.

The deal spree may continue. Anthem and Humana look lonely. While Walgreens Boots Alliance Inc. focuses on retail pharmacies in the U.S., its main rival's increasing breadth puts it at an uncomfortable disadvantage.

Even if this is the end of the deal-making, the impact of what has already happened will be far-ranging. Drugmakers and providers won't enjoy negotiating with these new giants. As for consumers, drug and provider options may narrow. Aetna and CVS will want to drive people to its own clinics, as UnitedHealth already does with its own provider network.

And PBMs are more effective and profitable when more people use tightly controlled drug plans; enrollees at newly affiliated insurers may find their drug choices are more restricted. The more people PBMs can push toward or away from a given medicine, the more negotiating leverage they have with drug manufacturers.

The merging companies have claimed huge cost savings will flow to consumers from these deals, but I'm skeptical. Research suggests costs can actually end up rising in some cases of health care consolidation. Less competition means more pricing power for the companies that remain. Markets with more insurers have lower premiums, while prices rise when hospitals buy physician groups. Though these are vertical deals, they will add to the market power of major players in already heavily consolidated industries, which seems like a recipe for monopolistic behavior.

True, reducing the number of middlemen who get a taste of nearly every transaction should theoretically cut costs. And these giants will be able to compel larger discounts from drugmakers and providers. But it would be a rather large deviation from standard capitalist practice if these conglomerates don't capture most of those savings for shareholders.

The newly merged companies will have debt to pay off and must prove to investors the deals were smart. That likely won't leave much in the way of cost savings for the average customer

Amazon and its partners say they hope to create a new and better health care system, free of the profit motive, for their employees. But the unintended consequences of their interest in the sector will impact a far larger group of Americans much sooner.

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Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.