Doug McMillon sounded determined. It was Thursday, June 28, 2018, and the biggest business news story of the day was very bad news for Walmart and its CEO.
That same morning, Amazon had announced that it had signed an agreement to purchase a young company called PillPack, a five-year-old online pharmacy backed by venture capitalists. PillPack sold prescription drugs specifically to Americans who take multiple medications every day, and had licenses in forty-nine states to ship those drugs—packaged in organized daily packs—to customers’ doors. Not only would the acquisition give Amazon the pharmacy licenses and expertise to finally enter the highly regulated but ripe-for-disruption $350 billion prescription drug market, but it also landed another blow on Walmart, which had been extremely close to buying PillPack itself.
Just a few months earlier, PillPack and Walmart were so close to securing a deal that staff on both sides had already discussed the possibility of announcing the news to the American public through an appearance on a national morning show. But in the final days of a nearly two-month period of due diligence, Walmart suddenly hit the brakes on the deal, stunning just about everyone involved on the PillPack side. Walmart offered little explanation, other than that they needed to pause the talks and would be back in touch in about a month or so.
Several years later, when the US Department of Justice sued Walmart for its pharmacy division’s alleged role in the opioid epidemic,1 it became clear that the DOJ had been investigating Walmart during the time of the PillPack talks in the first half of 2018.2 It didn’t take much for people close to the deal to start wondering whether the DOJ probe might have been a reason for the pause.
Either way, when news broke that PillPack was selling to Amazon instead, McMillon, one of the most powerful businessmen in the world, phoned PillPack’s thirty-two-year-old CEO, TJ Parker, and pleaded with him to reconsider the Amazon deal.
“I think you made the wrong decision,” McMillon told him, according to someone familiar with the conversation. “We were the right buyer.”
McMillon was apologetic about his company’s mismanagement of the acquisition process and vowed to work one-on-one with Parker to push a sale to Walmart across the finish line if the entrepreneur backed out of the Amazon deal. Of course, it was already far too late. Like with the battle for Marc Lore’s Diapers.com years earlier, Amazon had ripped a promising company right out of Walmart’s grasp. And this time it happened in the $4 trillion health care industry, which each company had big hopes of disrupting, just as they had each first done with retail decades ago.
Pill-Oh! Fight
In 1978, when Doug McMillon was still just a middle schooler growing up in Jonesboro, Arkansas, Walmart opened its first pharmacy location, along with auto parts and jewelry departments, as it started to inch toward an all-in-one shopping experience format that it eventually formalized with the introduction of the Supercenter a decade later. By the time McMillon took over as CEO, his company had opened thousands of pharmacy locations and had grown to become the third-largest pharmacy player in the country, only surpassed in size by Walgreens and CVS. Pharmacies offered customers another reason to visit Walmart stores, and roam a Supercenter’s maze of merchandise-packed aisles before or after picking up a prescription in the back or corner of the store.
At the same time, mail-order pharmacies, which had been in existence for decades, were being reinvented. Amazon had once owned a large piece of an online pharmacy called Drugstore.com, which rose and fell during the Web 1.0 era. But now new players began entering the space in a renewed effort to make buying and receiving prescription drugs much easier to do online. One of these young companies was PillPack, founded in 2013 and launched publicly the following year. TJ Parker, the son of a New Hampshire pharmacist, had teamed up with a technical cofounder named Elliot Cohen, whom he met at an MIT hackathon.
Together, their vision for the company was fairly straightforward: to make it as easy as possible for the tens of millions of Americans who take multiple medications for chronic conditions on a daily basis to purchase their prescriptions online and have help keeping track of what to take when. PillPack presorted the medications into small packs organized by the time and day that the customer needs to take them, eliminating one stressful piece of care for those taking several pills a day. By 2017, PillPack had ripped out all the off-the-shelf software and computer systems it had previously used to run its operation and began using a homegrown system that made running an online pharmacy much less complicated than running traditional pharmacies in the brick-and-mortar world.
Walmart took notice. PillPack’s core business was interesting, but the way it ran its business was even more attractive. PillPack’s software, and other technology chops, were especially attractive to those who were plain-faced about how bad Walmart Pharmacy’s IT systems were.
“Nothing they had was rocket science,” a former Walmart Health division executive told me. “Nothing they had was something that Walmart couldn’t have done. It’s just that Walmart wasn’t going to do it.”
By 2017, PillPack’s leaders were meeting with potential partners to talk about large commercial agreements. One of them was Walmart. After months of on-and-off conversations, Walmart executive Lori Flees posed a question to PillPack’s founders: How about we just buy you outright? While the entrepreneurs believed they had a clear path to building a long-term, sustainable, independent company, they knew it was going to be capital-intensive, and the funds they currently had in the bank definitely weren’t going to cut it. They still weren’t convinced that selling was the right path—they felt confident they could attain more venture capital when necessary—but they let Flees and team know that they were certainly open to the idea of selling.
Late that summer, Parker traveled to New Jersey to meet with Marc Lore, Walmart’s e-commerce chief, who had floated in and out of the discussion for months. After rebuffing some lower offers, Parker told him that anything less than $500 million wouldn’t even be worth discussing with the startup’s board of directors. (PillPack had been valued at around $300 million in its most recent round of venture funding.) Soon after, Flees notified Parker that the two sides were too far apart on a fair purchase price, but they should stay close and still consider a commercial arrangement if it made sense. Right before the end of that year, though, Flees got back in touch and said she thought the two sides could make a deal work after all.
Parker was indeed interested. But first, the banker the company had hired to help run a potential sale process felt it necessary to get other bidders involved. Top of mind was a certain Seattle-based tech giant that finally seemed ready to enter the online pharmacy space.3 In late 2017, Parker and his cofounder Cohen flew to Seattle to pitch a large contingent of Amazon officials on a potential acquisition. The assorted staff included Doug Herrington, the onetime head of Amazon’s consumables and grocery business, who had since been elevated to run Amazon’s entire North American retail business. Amazon had also been toying with building an online pharmacy, and members of that fledgling team also packed into the conference room to hear from the entrepreneurs.
Unfortunately for Parker and Cohen, their pitch didn’t land, and Herrington and company hinted that they might be able to build an online pharmacy on their own. Amazon, like many new entrants attempting to penetrate the prescription space, felt that they had to target customers who paid for medications in cash, because powerful industry middlemen, called pharmacy benefit managers (PBMs), had a stranglehold over whose customers could and couldn’t use insurance for prescription drugs. The rise of high-deductible plans also played in the company’s favor.
“Let’s just get out of the insurance quandary altogether and let’s build something customers love for the twenty percent that need to, or can, pay in cash,” was how Greg Greeley, the former head of Amazon Prime, recalled the internal discussions. “Then it was just a matter of when do we prioritize this. We were going to build it.”
With one big suitor seemingly off the table, Parker and Cohen continued to go deeper into conversation with Walmart in a series of visits to the home office in Bentonville. Walmart leaders also traveled to PillPack’s headquarters in New Hampshire for an up-close look at their operations. Things seemed on track.
Then, after a conversation with Marc Lore, Parker felt confident that a final offer would value his company at at least $600 million, with added compensation on top for both founders and their staff. They were about to become generationally wealthy.
By late winter of 2018, the two sides had entered an exclusive forty-five-day negotiation window, during which Walmart could complete due diligence and secure a deal. Within that time frame, which eventually was extended by a week or two, PillPack was not permitted to discuss an acquisition with any other companies. By then PillPack’s founders were probably most excited about envisioning a world in which Walmart.com customers would be able to purchase prescriptions for delivery alongside toys, or toiletries, or maybe even groceries.
“The core thesis,” according to someone familiar with the deal talks, “was that if you could give consumers the same tools to shop pharmacy as they shop for other categories in their life, you could fix a bunch of the knock-on supply chain [and] drug pricing issues.”
Some Walmart executives, however, had a much less sexy idea. They wanted to use PillPack and its software to make Walmart’s existing pharmacies operate more efficiently and economically.
“We coveted their systems,” said Marcus Osborne, a fourteen-year veteran of Walmart who served as the head of the Walmart Health division before departing in 2021.
At the time, Walmart was staring down a necessary investment of hundreds of millions of dollars to upgrade its own pharmacy technology system. For maybe $100 million more, some inside Walmart thought the retailer could get that from PillPack with the added bonus of continuing to grow the startup’s existing core business.
The Walmart executive who delivered the message about what Walmart really wanted from PillPack was Flees, the same company leader who was initially hired in 2014 to serve as Doug McMillon’s corporate strategy lead. And just like she had done when counseling Marc Lore on how to pitch some of his initiatives to Walmart’s more traditional store leaders, Flees was now counseling PillPack’s founders on the right way to win over the Walmart execs who needed to sign off on the deal. The Walmart corporate translator was at it again.
Walmart’s pharmacies did indeed need a lot of help, even if they had at one time been innovative in their own right. In 2006, for example, Walmart introduced a plan to charge customers only $4 per prescription for the generic version of around three hundred of the most commonly prescribed medications.
“There was no certainty that they weren’t going to lose their shirt on that deal,” Osborne, the longtime Walmart health care executive, said.
But for the tens of millions of Americans without insurance, or with high-deductible plans, the initiative was a true game changer.
“It was a spectacular success,” he said.
But that had been one of Walmart’s few innovations in the pharmacy space. (In the summer of 2021, Walmart’s announcement that it would begin selling an affordable private-label version of analog insulin had the potential to become another.)4 McMillon believed that Walmart had an opportunity to be even more disruptive in the health care industry and needed to keep trying to make its own imprint on the sector. In 2015, CVS’s acquisition of Target’s pharmacies prompted McMillon to ask Flees to evaluate what Walmart could and should be doing in health care. The chance to buy PillPack, along with its technological prowess and talent, represented a potential new era for pharmacy innovation at Walmart.
Once Walmart paused on the talks, though, PillPack reengaged Amazon. This time Parker was confident he had nailed his pitch in a new meeting with a longtime Amazon executive named Nader Kabbani, who had been put in charge of Amazon’s internal pharmacy plans. After the meeting, Parker stretched out across the lawn in Seattle’s Olympic Sculpture Park, pulled out his phone, and shot off a text to his executive team.
It was the best pitch of his life, he said, and he was confident the deal was going to happen.
That meant Walmart’s chances were all but dead. Not even a call from the CEO of the world’s largest retailer could change that.
Meanwhile, Amazon’s acquisition of PillPack, for a little over $750 million up front (two sources said the total all-in value eventually reached $1 billion), paved the way for the tech giant to launch its own pharmacy online, with innovative industry entrepreneurs leading the way. It had been a long time coming, though some close to the deal found it odd that Jeff Bezos never met with PillPack’s founders during the acquisition process. After all, Bezos had been burned once before.
All the way back in early 1999, Amazon had bought a 46 percent stake in an upstart website called Drugstore.com, with Bezos joining its board of directors as a result. As its name indicated, Drugstore.com aimed to sell the types of products commonly found in local drugstores, and that included prescription drugs. Among the challenges Drugstore.com faced was the cold shoulder it was getting from some of the powerful middlemen of the prescription drug industry—PBMs. Years later, these same middlemen would spar with PillPack as its service gained more traction, at one point costing the startup one-third of its customers.5 Dawn Lepore, one of Drugstore.com’s former CEOs, said a major turning point was when a large PBM called Medco shut Drugstore.com out of its insurance network, which included tens of millions of US customers.
“For 1 out of 5 people who came to the site, we would have to tell them we didn’t take their insurance,” Lepore said in a 2018 interview.6
Amazon eventually sold its stake in Drugstore.com as the business foundered. The idea of building an online pharmacy inside Amazon, however, percolated for years, with multiple teams coming up with ideas on how the tech giant might enter the space. Eventually, leadership aligned on the PillPack acquisition as the best path to accomplish their goals. Then, in November 2020, Amazon introduced Amazon Pharmacy, separate from the PillPack business, and of course with free two-day delivery for Prime members. The company said at the time that Prime members without prescription drug coverage, or with a high-deductible plan, could save up to 80 percent on generic drugs and 40 percent on brand-name drugs when paying in cash. Amazon Pharmacy also developed a tool for shoppers to compare drug prices in-cash versus with-insurance before checking out.
“Our goal is to make accessing prescription medications as simple as any other purchase: saving customers time, giving them more control over their purchases, and helping them stay healthy,” Amazon spokesperson Jacqui Miller told me in an email at the time.
It sounded a lot like the vision the PillPack founders were excited to build at Walmart, before the deal ultimately fell apart. Even with the introduction of Amazon Pharmacy, Amazon continued to encourage PillPack customers to use that service since it was designed for those who regularly take multiple medications. On the other hand, Amazon Pharmacy might appeal to those with less regular or pressing medication needs. Someone who might only need blood pressure medication or prescription pills for anxiety. The logistics behind the service, however, wouldn’t be able to serve customers who needed a prescription filled the same day, such as an antibiotic to treat an infection.
Eventually PillPack’s founders hoped that the pharmacy would evolve to a place where customers could use it to compare the prices of different medications designed to treat the same ailment. That would require a format similar to what Amazon had pioneered years before with the Amazon Marketplace, through which merchants big and small vie with each other and, many times, Amazon itself. In this case, prescription drug makers and third-party pharmacies would not only be competing with each other for a sale but possibly with PillPack or Amazon Pharmacy as well.
“It’s supercomplicated,” a source said.
But, over time, Parker recognized that even with Amazon’s reputation for experimentation and innovation, it was difficult to get big initiatives off the ground at the company. Bureaucracy had finally crept in, as it had done at Walmart many years ago, and it was difficult to build healthcare technology inside the systems of a retail organization. Parker, just like Marc Lore at Walmart, began feeling stifled.
By the time the entrepreneur left Amazon in 2022, his full vision for Amazon’s potential in the pharmacy world was not yet realized, but he remained hopeful that someday down the road it would be. Meanwhile, elsewhere in the company, another health-related initiative was receiving strong public backing from Amazon’s new CEO, Andy Jassy, despite being a much tinier business than Amazon’s pharmacy initiatives.
Amazon Care
As the coronavirus pandemic whipsawed around the world in early 2020, and variants catalyzed new waves of the Covid-19 virus every few months, an Amazon executive named Kristen Helton could only grimace at the missed opportunity—both for Amazon and for people all over the US desperate for medical consultation. Telemedicine—the practice of consulting with a health care provider by phone or videoconference—was suddenly becoming a necessity rather than a nice-to-have, and Helton’s team inside Amazon was working on a service that they felt was even better.
“We got . . . so many requests, and I would have loved to have served those customers,” Helton told me in an interview in 2022. “We just weren’t quite ready to do it.”
It might have been especially disappointing to Helton, as the former entrepreneur and technologist had been working for years toward a big moment like this one. In 2015, she and two other entrepreneurs were building a startup based on an implantable body sensor smaller than a grain of rice that would continuously monitor a person’s body chemistry. One early use case was for wound-healing specialists to track the oxygen levels in the legs of patients, in an attempt to avoid amputation.7
Then an investor introduced her to a technologist named Babak Parviz.
Parviz was well-known in the technology industry for leading the team that created the “smart” glasses known as Google Glass. But a year before Helton’s meeting with Parviz, he had left Google for Amazon, where he was overseeing an experimental research lab dubbed Grand Challenge, where some of Amazon’s most prized employees were tasked with thinking big and super long-term on new moonshot ventures.8
Upon meeting Parviz, Helton posed a question: Could you imagine doing something in health care?
“Come think of something good and put it to paper,” Helton recalled Parviz responding, “and if you can get it funded, then we’ll do something in health care.”
Though captivated by inventing technologies that might represent the future a decade down the road, Helton also knew that the health care industry was in need of immediate innovation, especially when it came to addressing more foundational problems with shorter timelines for improvement. And because of Amazon’s track record of innovation, coupled with its gargantuan customer base, Helton believed the tech giant could be a legitimate player in health care if company leaders had the will. She took the job.
By the end of 2016, Helton had come up with a promising idea for a new health care service and, with the help of Parviz, had crafted the seminal document that just about every new initiative at Amazon emanates from: a PRFAQ memo, which aims to imagine how the company would market the service in a press release upon launch, and how it would answer the most common questions the general public might have.
With the dateline of June 1, 2018, the imaginary press release introduced “Amazon Care”—“Comprehensive, high-quality healthcare, anytime, anywhere, available in minutes.”
“Care enables direct access to a medical professional in minutes from nearly any internet-enabled device via a video link,” the document read, “enables collection of medical data from an at-home device, and provides access to Mobile Medics for at-home procedures such as blood draws and vaccinations.”
Not only would Amazon Care patients be able to video-chat or message with medical professionals, but they’d also be able to request in-person care from registered nurses when needed. In the retail world, such an approach would be dubbed “omnichannel”—reaching customers in all sales channels, whether via e-commerce or brick-and-mortar stores. And as with many of Amazon’s past innovations, from Amazon Prime to Amazon Fresh, adding a convenience layer for customers was paramount. In the case of Amazon Care, that meant that registered nurses would visit Amazon Care patients if necessary, rather than customers trekking out to a doctor’s office while ill.
The service’s first customers would be Amazon’s own employees and their immediate families—a sizable endeavor on its own for the country’s second-largest private-sector employer. But the ambition was always bigger—to offer at some point down the road an innovative Amazon health care service to Americans unaffiliated with Amazon, as well.
Amazon executives often say that they will only enter crowded sectors if they feel they have a highly differentiated product or service, so simply competing head-on with telemedicine companies that had been building their service and customer bases for years seemed like a nonstarter. But Helton and team also had conducted research into what was missing in the space.
With the help of several physicians, they identified nearly fifty thousand different reasons why a patient might visit a primary care physician over the course of a year. What they found posed a hard truth about the limitations of telemedicine: less than 6 percent of those visits could be completely handled via a video call with a health care provider.
Helton envisioned Amazon sending patients an at-home testing device that could act as a camera, thermometer, and stethoscope all in one. When this device was combined with the videoconferencing feature, Amazon Care could suddenly address about 20 percent, or one in five, traditional primary care visits, for conditions like ear infections and rashes. Finally, with the third leg of the Amazon Care stool—at-home visits by a medical professional—the service would be able to handle medical events that make up more than two in three traditional primary care visits.
By September 2016, Jeff Bezos had reviewed the document with Helton. By early the following year, the Amazon CEO gave her the green light to move forward. Over the course of 2017 and 2018, Helton and her team modified the Amazon Care service from the original one envisioned in the PRFAQ memo. One of the most prominent changes involved moving away from sending the at-home diagnostic devices to patients’ homes. The company would eventually provide them instead to the nurses who would be dispatched to patients’ homes, though that took some time.
In 2018, Amazon began recruiting nurses and doctors with emergency room experience in the lead-up to a planned 2019 launch. Helton and others were interested in that kind of experience because they envisioned the service initially serving as a replacement for urgent care visits, not the longer-term vision of acting as primary care physicians. To some of these new hires, the opportunity seemed almost too good to be true. Many received raises over what they previously were earning, and an important role on the ground floor of an initiative that recruiters promised would “change the face of health care.”
“When hospitals are like, ‘You need to focus on the patient experience,’ I’m like, ‘I’m just trying to keep this person from dying,’” an Amazon Care nurse who previously worked in emergency rooms told me. “This was the first time I got to be customer-obsessed.”
They eventually realized they would technically be working for a separate company, called Oasis—which would later be renamed Care Medical—but the only client was Amazon Care. That year, Amazon began a pilot test of the service for a subset of Amazon employees and their families living in Seattle. During those early days, the same startup atmosphere that was attractive to the former hospital workers was also shocking in some respects. Some early medical staff, for example, were surprised to find that Amazon Care execs were intent on having company engineers create key software—an electronic medical record (EMR) system—from scratch, rather than using commonly used systems that already had a good reputation in the health care industry. That created some safety gaps that Care team professionals found problematic. For example, nurses had to inform tech staff that each page on a patient’s medical chart should include their allergies. There was also frustration that Amazon’s tech platform made it difficult to share records with other medical providers, a feature that is used frequently in common EMR systems.
“They don’t look at something and say what is right about health care,” a former nurse said. “They only focus on what is wrong.”
The equipment that medical staff carried with them to patient visits was also lacking, some former employees said. The blood pressure cuff and pulse oximeter were ones you could pull off the shelf at a Walgreens, and the equipment used to transmit images of a patient’s throat or ear to a doctor on the other end of a computer felt like it was hacked together. Seeing images from a child’s throat or ear was especially challenging.
“It never really worked, and the quality wasn’t good,” a former Care Medical nurse told me.
On a visit to meet with the Amazon Care team, Dr. Atul Gawande, the celebrated surgeon and author, seemed bewildered by the quality of equipment—or lack thereof.
“This is bad,” Gawande said, according to someone who was present.
(From 2018 to 2020, Gawande was CEO of Haven, a joint venture between Amazon, JPMorgan Chase, and Berkshire Hathaway, aimed at reducing health care costs at the companies while improving care for their employees and, eventually, sharing their innovations with the outside world. The venture was later dissolved after leaders recognized that a main goal, to serve as a central health benefits office for three companies with vastly different geographies and cultures, was going to be too complicated. “Once that became clear,” Gawande explained, “it threatened to become a very expensive think tank.”9 The Wall Street Journal also reported that concerns from the three companies over how they were being asked to share data with the consortium, along with pushback from insurance companies, “stymied Haven’s efforts to determine how much the companies paid for medical care and why.”10)
Amazon’s self-proclaimed customer obsession also led to some decisions early on that might have appealed to employees who were the service’s patients, but made some medical staff uneasy. Commonly prescribed antibiotics like Z-Pak pills were stored in locked cabinets inside one of Amazon’s downtown Seattle office towers, and nurses were expected to deliver them themselves to patient doors. There was no pharmacist supervision.
“It was a convenience thing,” a former nurse told me. “They were trying to be a really white-glove, all-inclusive, concierge medicine service.”
Eventually there was enough pushback that Amazon contracted out with a local pharmacy chain that filled patient orders. The medical staff also found themselves having to shoot down what they saw as ill-advised ideas. One, for example, would have allowed patients to order whatever blood work they wanted without a doctor’s supervision or direction.
“They hired physicians and nurse practitioners trained to look for disease process but wanted to bypass them and just go with Dr. Google,” one nurse said.
Over time, Care Medical nurses began seeing more kids and infants—the children of Amazon employees. But some basic equipment for pediatric care had not been purchased, such as infant scales, or had to be fought for to procure, such as pulse oximeters designed specifically for infants. Early on, there was also no protocol or process for following up with significantly ill patients. In one instance, a nurse paid a visit to a man who was violently ill with the flu. He refused to go to the emergency room as the nurse advised, so she requested that her bosses let her drop by for a follow-up visit later in the day. Her request was denied. She instead settled for a phone check-in later that evening.
“I didn’t have anything to back me up—no protocol.”
The work environment for the clinical team did seem to improve, however, after Kristi Henderson, an executive with extensive experience in telehealth, joined Amazon Care in 2019. Over a year-plus at the company, she successfully pushed for nurses to get new equipment—an existing device called TytoCare, designed specifically for medical staff conducting in-home visits with a doctor looking on remotely. She also oversaw the creation of a “command center” that allowed staff to monitor the whereabouts of nurses in the field at all times.
But a little over a year after joining, Henderson left the company, frustrated, former colleagues say, by internal roadblocks she faced on both the business and clinical sides of the operation. All the time, though, customer satisfaction scores among Amazon’s employees remained strong. Patients—or customers, as Amazon Care’s leadership team insisted on calling them—could message or videoconference with a nurse or doctor 24/7, and receive medicine deliveries quickly.
“My son had an ear infection during the early days of Covid when Seattle felt like a scene from Outbreak,” Chance Kelch, a former Amazon executive, said. “He was fully scream-crying.”
Kelch used the video-calling feature of Amazon Care to receive a diagnosis, and had a prescription delivered to his home within an hour.
“It was magic,” he said.
The pandemic provided other opportunities, and challenges, for the service. Management decided to pause in-person nurse visits in the early days of the pandemic but set up a drive-through Covid-19 testing site for Amazon employees. The first day on the job, one medical assistant who was now being asked to administer Covid tests was trailed by a superior who timed each interaction with a patient. The medical assistant wasn’t going fast enough, she was told, in what might not be a surprise to Amazon warehouse workers, who must hit quotas and have their performance monitored in real time.
“In my clinical eyes, I was taking the time to properly explain the process to the patient and provide them with the adequate instructions for isolation and test results,” the former employee said.
As Amazon Care pulled back from in-home visits, which had been seen as a key differentiator of their service, competing telehealth services were receiving an influx of new patients while Amazon was still just testing its service out on its own staff. Prior to the pandemic, less than 1 percent of total outpatient visits to a health care provider were conducted via telemedicine. But in the first six months of the Covid pandemic, that number shot up to 13 percent.11 For Amazon, there was never going to be a better time. But the Amazon Care service was nowhere near ready for prime time.
In an interview, Kristen Helton, the Amazon Care boss, called that wasted opportunity her “biggest regret.” At times Helton questioned whether the pursuit was worth it. Should Amazon really be in this space? But then she would look at the high customer satisfaction scores or get a pep talk from longtime Amazon employees, and put her head back down to keep building.
While the service was still restricted to just Amazon employees, nurses were rarely overwhelmed with work but were often asked to pick up extra shifts or days anyway. They assumed that Amazon, with its obsession with customer satisfaction, just wanted to make sure it could live up to its promise that patients, especially its own employees, wouldn’t have to wait long for a virtual appointment.
In the spring of 2021, Amazon announced a big milestone: they were opening up Amazon Care to employees of outside companies also located in Washington State. Precor, a maker of workout equipment and a subsidiary of Peloton, was the first to sign up. By the summer, Amazon opened up the telemedicine portion of the service to its employees in all fifty states, and said its in-person service would expand that year to a handful of other cities, including Boston, Austin, and Washington, DC. By February 2022, Amazon had added a few more employers to its service, and promised to expand in-person services to twenty more metro areas.12 That same year, Amazon began permitting Amazon Care patients to use the service for more than just urgent care needs; the service began offering primary care services, replacing the typical in-office annual physical with a convenient nurse visit at home.
But there were signs that the service still didn’t have full company support. In the same month of the expansion announcement, Amazon’s Alexa division announced a partnership with a virtual health care rival called Teladoc, in a surprise to industry insiders who questioned what that partnership said about the future of Amazon Care. Why would Amazon, after all, boost the visibility of a one-day competitor of Amazon Care if it had faith in Amazon Care?
“It’s . . . about when do we feel like we’ve really nailed a compelling customer experience,” Helton, the Amazon Care leader, told me. “When we think we’ve done that, then you’ll see the next [revision] of Care and Alexa.”
What went unsaid was that Amazon had not yet been able to cut deals with many of the big insurance companies that would sign off on adding Amazon Care as a covered medical service in their networks. As a result, Amazon Care had to pitch each employer individually to get them to cover much of the costs of the service for their own employees—an approach that threatened to eventually doom the service.
Even so, the most powerful full-time employee at Amazon—CEO Andy Jassy—appeared publicly to have a soft spot for the service. In late 2021, he labeled Amazon Care one of the company innovations he was most excited about while speaking at an employee town hall meeting.13
“What we’re trying to do with Amazon Care and telemedicine . . . radically changes [the] game,” he said.
The game, however, had many players. Over in Bentonville, another dominant player in the retail industry was investing significant resources and time into building its own health care service. In doing so, it hoped to take advantage of the thousands of assets it possessed that its Seattle-based rival didn’t: all those giant brick-and-mortar stores.
Dr. Walmart
When McMillon took over his dream job in 2014, his company was already well on its way to taking another crack at creating a doctor’s-office-type experience within some of its stores. During the previous decade, Walmart had worked through several iterations of partnerships that resulted in other companies operating urgent-care-like facilities within its Supercenters.
But that strategy largely flopped, as even a corporate titan like Walmart ran into the realities of an entrenched and unwelcoming industry to would-be disrupters. In some instances, Walmart leased space to entities with ulterior motives: hospital networks. One hospital network, for example, ran a shuttle bus from their Walmart clinic to the hospital, seemingly attempting to turn low-profit clinic patients into high-profit hospital patients.
“I understand why the hospitals do it, because they build the Taj Mahal to health care,” Osborne said, “but like, that’s not what people need.”
But those hospital networks understood what Walmart would soon find out. The economics of urgent-care-type facilities can be brutal.
“The money is in chronic illness,” Osborne added. “A diabetic who comes back every month makes you more money than somebody who has a strep throat once a year.”
So the world’s biggest retailer would eventually try its hand at creating and running its own medical facilities. One main goal, reminiscent of Amazon with Amazon Care, was to serve its own employees, and hopefully offer superior care. Another was to bring down the company’s own health care costs along the way. Reducing health care costs was something that even Sam Walton felt passionately about. Way back in 1991, while Walton was undergoing treatments for the blood cancer that he would succumb to a year later, he made an impassioned case for Walmart to use its might in a new way. His plea came shortly after he discovered how much a hospital was marking up the cost of an MRI he underwent.
“We’ve got to get the hospitals and doctors in line,” he told a room full of employees during one of the company’s regular Saturday morning leadership meetings.14 “We’ve got to get those charges under control.
“These people are skinning us alive,” he added.
Years later, Walmart’s benefits division introduced an innovative program called Centers of Excellence (COEs) in partnership with a handful of top hospitals across the US. Under the initiative, Walmart covered the cost of travel to these partner hospitals for company employees in need of certain major surgeries and transplants, while facilitating second opinions and remote reviews of cancer treatment plans, too. The company was trying to reduce the number of unnecessary or inappropriate procedures or surgeries performed on their employees by local doctors or hospitals. The idea was that these COE relationships would improve the health and care of employees while eventually reducing Walmart’s health care payments.
“I heard from Walmart a righteous indignation about inappropriate care,” Dr. Jonathan Slotkin, a spine surgeon with one of the COEs, told me. “There’s a throughline there to the Sam indignation in that video.”
On the retail side of the business, leaders would take a different approach. Starting in 2014, Walmart began rolling out what would end up being nineteen facilities dubbed “Care Clinics” inside Supercenter stores in Texas, South Carolina, and Georgia. They were run by nurse practitioners and designed to make access to a health facility more convenient in small communities. By doing so, Walmart could encourage its employees to visit a nurse or doctor more frequently, rather than let medical issues fester to the point that an expensive emergency room visit was eventually needed. If Walmart could exchange an ER visit for even a couple of clinic visits, the hope was that its employees would be healthier and Walmart’s health care costs would decrease. Reducing these costs could have a drastic impact on the retailer’s bottom line.
At launch, Walmart employees and families enrolled in the company’s health plans paid just $4 for a visit, in what seemed like a nod to the $4 cost of generic drugs at Walmart pharmacies that had served as a major disruption a decade earlier. Nonemployees would pay $40 a visit. The large insurance carriers were not brought on board in the early days, so the pilot test was really aimed at gaining traction first with employees before courting other customers.
Some critics viewed the initiative as a way to drive mom-and-pop doctor’s offices off the map. But leaders of the program saw it very differently.
“That wasn’t it at all,” a former Walmart health executive told me. “It was that we actually had a utilization problem amongst our own associates in the wrong direction, meaning they never used health care until they had a big problem. And then they used the emergency room and got admitted to the hospital.”
In locales where Walmart opened Care Clinics, emergency room visits among Walmart workers did in fact decrease, this former exec said. In turn, Walmart’s benefits division experienced cost savings. That was important because Care Clinic leaders thought these savings should be taken into account when calculating the profitability of the initiative. The savings were also why the company was willing to subsidize the cost of a visit and only charge employees $4.
But things were never quite that simple for leaders of nonretail businesses operating within the retail kingdom of Walmart. They reported into the US stores division of the company, run by Greg Foran, Walmart’s longtime US CEO—the no-BS retail operator who had at times sparred with Marc Lore over the e-commerce division’s spending and money-losing ways. Foran was supportive of the idea of Walmart playing a bigger role in health care but did not see things the same way as the Clinic Care leaders. He ultimately disregarded the cost savings from reduced employee ER visits and mandated that the facilities run profitably on their own without accounting for those savings.
“He wanted to be supportive of health care in every way possible, but it couldn’t get in the way of him doing his job,” the former health care executive told me. “His number one job was to fix US stores and he couldn’t allow capital or focus to cause any distraction from that.”
“In his mind, it was like, ‘I’ve got a first-things-first problem,’” said Osborne, the longtime health executive at Walmart. “You can’t do nineteen things in parallel.”
Without that accounting allowance, a clinic’s march to profitability was much longer, and looked especially bad in light of shorter ROI timelines for a Supercenter store. Of course, they were remarkably different businesses—a fact that seemed to get lost on some of the company’s brick-and-mortar retail leaders. As a result, the Care Clinic original business plan had to be scrapped, too. Those $4 visits for employees no longer made much sense. Walmart had been subsidizing the price of visits for associates so that they would use the clinics more and take trips to the hospital less.
But if the Care Clinic team wasn’t getting financial credit for that trade-off, the original economics of the business model just couldn’t work. In turn, Walmart needed to pursue deals with the large insurance players in the industry so that the service was more attractive to nonemployees as well. It was a death blow.
“That basically just made the clinic less affordable to the general public,” the former executive said, “and started to mimic something that looked more like the status quo of health care.”
After Flees came on board as McMillon’s lead strategy executive, he tasked her with digging deep into health care opportunities and how Walmart should play in the sector. They weren’t convinced that Care Clinics were the answer, and fixing the company’s e-commerce business was a much bigger priority for Walmart given the direction in which the retail world was heading. As it happened, on the same spring day in 2016 that McMillon met with an intriguing entrepreneur named Marc Lore, who was still running an independent Jet, Flees was meeting with representatives from Aetna to discuss a potential health care partnership. When both returned, the CEO had a message for his strategy chief.
“I need you to slow down what you’re doing in health care because I want you to focus on Jet and help do the diligence,” McMillon told Flees.
Eventually the Care Clinic initiative fizzled out while Walmart leaders agreed to elevate health and wellness into its own division of the company—in part to attract what they hoped would be better talent—and rethink the best way to make an impact. In 2019, the company conducted a survey of its customers, across all demographics, to get a better feel for their health care priorities. More than 40 percent of those surveyed revealed that cost was the biggest impediment to getting health care. The company also focused on the finding that 80 percent of their US store locations are in communities that the government labels as medically underserved. Around 150 million people visit a Walmart store in the US every week, so leaders remained convinced that there was a role for the company to play.
McMillon’s health care pursuits also seemed to be influenced by external and internal conversations alike.
“I think he was partially influenced by the [Walton] family, who had started to get more interested and focused and believe there was opportunity,” Osborne said, “but I also think he was being influenced by his peers. He would say, ‘I go to Davos [Switzerland, home of the World Economic Forum] and every conversation ends up being a health care conversation.’”
By the fall of 2019, Walmart introduced a new type of health facility, called Walmart Health. The company pitched the new health care format as “the first to put primary and urgent care, labs, x-ray and diagnostics, counseling, dental, optical and hearing services all in one facility.” It was a mini-supercenter of medical care, alongside a real Supercenter. The retailer promised affordable prices, and transparency on what visits cost, with or without insurance.
If Walmart Care Clinics, run by nurse practitioners, were a first step toward Walmart serving as a primary physician, Walmart Health facilities were a two-footed leap forward. These facilities would have their own entrances from Walmart parking lots, rather than being buried deep inside a store like Care Clinics were. Walmart chose the first two locations, both in Georgia, because of high rates of chronic disease and a below-average number of primary care physicians in the area.15
“For them to try to make a dent here, and do something about skyrocketing health care costs, is in the interest of their own bottom line as well as the right thing to do,” said Christina Farr, a former top health-tech journalist who now invests in the field as a venture capitalist.
But stability was hard to come by at the top ranks of Walmart’s health unit. Less than a year after he oversaw the launch of the new Walmart Health facilities, and only two years into his tenure at Walmart, a top executive named Sean Slovenski left the company to take a CEO role at a small health-tech startup. Shortly after the first Walmart Health clinic launched, John Furner, the CEO of Sam’s Club, had replaced Foran as the Walmart US CEO. Insiders told me that Furner and other top leaders came away unimpressed with Slovenski’s vision for Walmart Health and how it was going to make money. Slovenski, on the other hand, did not appreciate that his plans for a massive rollout of thousands of Walmart Health clinics, which had been approved under Foran, now seemed at risk.16 Walmart’s bigness was also a problem.
“I’m not a big company animal,” Slovenski said after his departure.17 “As soon as I get to the point where bureaucracy is the rule of the day . . . I stop doing well in that environment. And Walmart is the biggest company in the world so of course it’s got bureaucracy and it wasn’t my cup of tea.”
Osborne, the former leader of the Walmart Health clinics, understood how the bureaucracy of the organization, and the structure that had someone like Slovenski reporting up to a CEO mostly focused on the core retail business, could be disillusioning.
“Walmart US . . . is now a holding company, but they don’t manage it like a holding company; it’s like a retail business that happens to have this little health care thing on the side,” Osborne said. “And so I think that Sean rightfully chafed against that. It’s like, ‘I’m trying to run this business, and you’re making me spend twenty-eight hours a week in these [meetings] that don’t have any meaning to what I’m doing. I don’t care about whether mac-and-cheese is out of stock.’
“No disrespect,” Osborne added, “[these meetings] are ninety-eight percent a waste of time when it comes to the management and leadership of your health care business.”
Months after Slovenski’s departure, Walmart hired Dr. Cheryl Pegus, a former cardiologist who once worked at Pfizer and as Walgreens’ first chief medical officer, to replace Slovenski and lead the company’s health and wellness efforts. Prior to Walmart, she was the chief medical officer for Cambia Health Solutions, a health insurance company. While the US CEO, John Furner, was intrigued by the idea of hiring a health technology executive to fill the role—specifically, the top health executive from Facebook parent company Meta—McMillon felt the company needed a doctor with health insurance industry experience, like Pegus.
Under Pegus, the rollout of new Walmart Health centers slowed. In the three years following the first center opening its doors, only twenty-six more locations, across four states, followed. Of course, the yearslong pandemic likely played a role in the deliberate pace. In October 2022, Pegus’s organization announced that sixteen new Walmart Health facilities would open in Florida alone over the course of the following year. While that seemed like a positive sign, it was still not clear that the retailer had yet landed on a slam-dunk successful model for a health care offering. In reviews on Google, the majority of the Walmart Health clinics had ratings of fewer than four out of five stars. Insider also reported in the fall of 2021 that “prices aren’t as low or clear-cut as they appear, thanks in part to hidden fees, and problems with billing patients and insurers have gotten in the way of Walmart Health’s ability to improve healthcare for patients.”
That same year, Walmart made a move to add telehealth services to its Walmart Health division by acquiring a decade-old company called MeMD. MeMD was later rebranded to Walmart Health Virtual Care and became an option for patients who visit one of the company’s Walmart Health locations in Florida. The expansion marked a first step toward offering an approach to health care that Walmart is already intimately familiar with from the retail world: an omnichannel experience.
“It’s the same thing in grocery—sometimes people just want to go online and have it delivered and they don’t want to go into a store. And other times, people want to go pick out their avocados, because they know exactly when they’re going to eat them,” Flees told me in 2022. “Health care is not so different—sometimes they want to physically see someone. And sometimes they just need to get the advice as quickly as they can get it. Our strategy is the same.”
Obviously, Walmart had deep expertise in the retail industry before it expanded into e-commerce. The same can’t be said for either its physical health care facilities or its virtual ones. But at the very top of the company, the most important voice at Walmart was preaching patience—at least outwardly. Inside Doug McMillon’s office on Walmart’s Bentonville campus in 2022, I asked the company’s chief decision-maker how serious the company’s commitment is amid some of the challenges encountered thus far.
“If this is a nine-inning game, we’re somewhere in the top of the second,” McMillon told me. “We’re just really still getting started.”
With the hiring of Pegus, McMillon said, Walmart finally had the right talent on board.
“She’s able to articulate a plan in a way that feels more understandable and complete to us,” the CEO told me.
For Walmart Health long-timers, though, it’s hard not to feel like it’s Groundhog Day. The company has cycled through nine leaders of the health and wellness division in just ten years, creating a revolving door of missed opportunity.
“Every time somebody new comes in, you take a step back, because they think they need to redo the strategy,” Osborne said.
In that interview with McMillon in early 2022, the CEO said he was confident the unit would show more progress over the next two years. He also let on that while he believed the health care division could become a slightly profitable addition to the company at some point, its role in the “strengthening of the Supercenters” was perhaps more important.
According to Osborne, the CEO also was candid internally about the financial role that a large health care business could play in defending against an Amazon encroachment. Namely, that a large-scale, multifaceted health care division could generate $10 billion a year in new cash flow for Walmart. With that additional cash on hand, Walmart could close the cash flow gap between itself and Amazon, and have the financial might to defend itself against a business assault on its core grocery business—so the thinking went.
In Osborne’s mind, that $10 billion figure was certainly attainable with long-term commitment and heavy investment. But the motivation itself was troublesome.
“Walmart is strangely at its best when it almost isn’t focused on economics,” Osborne said, with a nod to the $4 generics initiative of the mid-2000s. “When it’s just saying, ‘I’m going to do something that dramatically improves the lives of people.’”
Either way, for those who’ve worked on pieces of the company’s health care initiatives in the early days, any long-term success would be a long time coming.
“I believe and hope that Walmart will be one of the country’s most profound health care companies,” a former Walmart health executive told me, “but I am frustrated with the pace at which they have moved.”
After a pause, the executive reconsidered his stance a bit.
“But if you look at their history, it’s not actually abnormal,” he said.
It took a couple of decades for Walmart to perfect what would end up becoming the Supercenter model, he went on. The same could be said for the company’s move into grocery sales. So only about a decade into the company’s foray into operating its own health facilities, maybe there is hope that Walmart would eventually find a successful model.
“I’m hopeful that they’ll still be on the twenty-year plan and they’ll get it right and nail it and scale it,” he told me. “And the question will then be, ‘Are they too late?’ Because Amazon works in cycles much shorter than twenty years.”
Sure enough, in July 2022, Amazon announced another chess move even bolder than the PillPack acquisition. The company reported it had agreed to pay $3.9 billion to acquire One Medical, a company that runs a network of doctor’s offices and guarantees same-day or next-day appointments for a $200 annual fee. The company also provides 24/7 virtual care. Between PillPack, Amazon Pharmacy, Amazon Care, and One Medical, the tech giant that got its start selling physical books over the internet was now amassing the pieces to build a game changer in health care.
“We think health care is high on the list of experiences that need reinvention,” Amazon Health Services senior vice president Neil Lindsay said in a statement at the time. “Booking an appointment, waiting weeks or even months to be seen, taking time off work, driving to a clinic, finding a parking spot, waiting in the waiting room then the exam room for what is too often a rushed few minutes with a doctor, then making another trip to a pharmacy—we see lots of opportunity to both improve the quality of the experience and give people back valuable time in their days.”
In the aftermath of the One Medical announcement, though, the company would make a less celebrated one: Amazon blindsided its Amazon Care employees and medical staff alike by revealing that it was shutting down the telehealth and in-home service at the end of 2022. CEO Andy Jassy said shortly after the announcement that the Amazon Care shutdown decision was made before the One Medical deal,18 and a former Amazon health care leader confirmed to me that the viability of Amazon Care was in question long before the One Medical talks began. In retrospect, there had been some hints that the business line might be bleeding money. In the months preceding the shutdown announcement, Amazon Care nurses were told that they needed to fit in more home visits per day to improve their productivity. Jassy would later call the in-home-visit component of the service “unique and differentiated,” but the CEO also admitted that the company could not figure out the right economic model to support it.
Still, the news was especially difficult for those nurses who had fled the despair of emergency room work during the pandemic for better work-life balance and the promise of a lofty, well-intentioned mission.
“It felt like I was a part of something big—part of what health care was going to turn into,” an Amazon Care nurse told me a few days after receiving the bad news. “I’m devastated; I’ve literally just cried every day since because I don’t want to go back to the hospital. I found this holy grail of a job and I don’t want to go back to the hospital.”
While nurses like this one dealt with a post-Amazon reality, Amazon’s other healthcare plans slowly moved forward. In early September of 2022, One Medical revealed that it and Amazon had received requests from the Federal Trade Commission for more information about the proposed acquisition, signaling a longer government review before the deal could be approved. But many in the industry still expected the acquisition to eventually get the green light, catapulting Amazon deep into the health care industry as Walmart tried to build its presence with a more organic approach.19
Osborne, the former Walmart Health leader, believes Amazon’s One Medical acquisition could “absolutely” spell trouble for Walmart’s health care ambitions in the long run. But as has often been the case during the titan’s decades-long attempts at reinvention in areas from e-commerce to health care, the biggest barrier may be the one staring back through the mirror. All of the Walmart Health division’s leadership changes and “wildly inconsistent commitment” from the company’s top executives will be a lot to overcome, Osborne said.
Sure enough, in November 2022, news broke that Pegus, Walmart’s health care leader in whom McMillon preached confidence during our interview just seven months earlier, was departing the company to join a JPMorgan Chase health care unit.
“Walmart Health’s biggest threat,” Osborne said, “is Walmart.”