Amazon's Diagnostic Foray: A Promising Third Attempt in Healthcare

Amazon’s latest move to enter the diagnostics segment could mark a turning point in its healthcare ambitions, following two underwhelming attempts in the e-pharmacy and teleconsultation segments. Industry executives believe that the diagnostics sector, with its potential for growth, may finally provide the e-commerce giant the runway it needs to build a meaningful presence in the healthcare business.

The diagnostics space gained prominence during the Covid-19 pandemic and is undergoing rapid transformation, driven by consumer demand for convenience, affordability, and tech-led innovations. Analysts maintain that Amazon’s entry could have a cascading effect on the broader healthtech ecosystem, particularly by invigorating startups and strengthening investor confidence.

“Diagnostic business is capital-intensive, and early-stage investors have a liking for asset-light business, which is why there was a low offtake in the diagnostic business. However, it is changing, and investors are now investing in specific diagnostic companies,” said Anil Joshi, managing partner, Unicorn India Ventures, which has backed startups such as FutureCure and Sascan.

While Amazon’s healthcare journey began with much fanfare through Amazon Pharmacy in 2021 and later expanded to teleconsultation services, both verticals have struggled to gain traction. E-pharmacy, in particular, has encountered persistent regulatory hurdles that have slowed market expansion and dampened investor enthusiasm. Teleconsultation platforms, which boomed during Covid-induced lockdowns, have seen demand taper off as in-person visits resumed.

This led Amazon to recalibrate its healthcare plans under the umbrella of Amazon Medical. Diagnostics, with its broader applications, relatively stable regulatory environment, and strong demand growth, now appears to be a more promising avenue. The diagnostics market was valued at $18.5 billion in FY24 and is projected to nearly double to $35.8 billion by FY30, according to market research firm ResearchAndMarkets.

Amazon has partnered with Orange Health Labs, a startup known for its rapid home collection services and report delivery within six hours. The partnership is seen as Amazon’s way of leveraging its logistics muscle while tapping into startups’ innovation and agility.

Unlike e-pharmacy and telehealth, diagnostics is a segment with both high consumer stickiness and a relatively fragmented competitive landscape. Much of the current market is still dominated by unorganised players or legacy chains, opening the door for newer tech-enabled models to gain share.

According to Tracxn, there are currently 281 diagnostics startups, and more are entering the fray by targeting specific niches or geographies. These startups are using technologies like artificial intelligence, machine learning, and computer vision to deliver quicker and more accurate diagnostics. “Technologies like AI and computer vision are incredibly helpful, and startups are leveraging them quite well,” Joshi added.

Startups such as 5C Network and Qure.ai exemplify this trend. 5C Network has reduced the radiology report turnaround time from 48 hours to 42 minutes using a combination of AI and a distributed network of radiologists. It currently partners with over 600 hospitals and diagnostic centres across 27 states. Meanwhile, Qure.ai focuses on early detection of conditions like tuberculosis, lung cancer, and strokes, serving 15 million patients globally and clocking Rs 141 crore in revenue in FY24, an 83% jump from the previous year.

Convenience and digital scalability are two of the biggest advantages that startups hold over incumbents. Many operate on asset-light models, focusing on central processing labs and distributed phlebotomy networks. This approach not only reduces upfront investment but also leads to competitive pricing and faster services for consumers. Redcliffe Labs, for instance, claims to be 40% cheaper than traditional players and has performed 7.5 million tests since its inception in 2021.

“While legacy brands grapple with modernising established systems, many of which are designed for walk-ins and manual processes, startups are customer-centric by design, offering unparalleled convenience through services like at-home sample collection and rapid digital reports,” said Pearl Agarwal, founder and managing partner, Eximius Ventures.

However, the road ahead isn’t without its challenges. Experts caution that while technology offers efficiency, diagnostics remains a highly sensitive and trust-dependent sector. “Building trust and brand reputation is paramount in a healthcare system traditionally reliant on established players; gaining widespread acceptance for tech-driven solutions takes time,” Agarwal added.

Amazon’s foray into diagnostics is a strategic move that could redefine the healthcare landscape, offering consumers a more accessible and efficient diagnostic experience while driving innovation and investment in the healthtech sector.