Why are tech companies buying healthcare companies?

The convergence of healthcare and digital technologies has gained more momentum in recent years as healthcare firms adapt to the changing ecosystem and as big tech companies see the potential in integrating technologies in the medical sector.

The scale of the global digital health market stood at $175.6 billion in 2021, according to Grand View Research, and is estimated to grow at a compound annual growth rate of 27.7% from 2022 through 2030.

The market research firm attributed the anticipated forecast to increasing smartphone penetration, improving internet connectivity and healthcare IT infrastructure, and the rising prevalence of chronic diseases, among other factors.

In the US alone, the size of the digital health market hit $66.5 billion in 2021 from $55.3 billion in 2020.

The COVID-19 effect

As the COVID-19 pandemic took hold, companies have realized the importance of digital transformation in healthcare in terms of diagnosis, medical records tracking, surveillance and other services from transmission of prescriptions to hospital bedside devices for patient monitoring.

However, a study by the National Academy of Medicine published in January found that the pandemic also revealed limitations to digital health technologies including the need for a coherent and accessible data infrastructure to help address the pandemic.

Those limitations still exist even as a number of tech giants have invested heavily in the healthcare sector.

Apple’s focus on health and fitness

Apple (NASDAQ:AAPL), previously the world's most valuable company before it lost the crown to Saudi Aramco, last week underscored its strong presence in the healthcare market with its devices that are “empowering people with their health information.”

The company continues to roll out new updates for the Apple Watch and the iPhone that are focused on health and fitness. This fall, new updates of the iOS and watchOS will center on 17 areas of health and fitness, from heart health and sleep to mobility and women’s health, the company said.

In 2019, Apple CEO Tim Cook said the company’s health offerings will be “Apple's greatest contribution to mankind.”

Amazon’s new healthcare bet

Amazon.com (NASDAQ:AMZN) also has its share of health investments. The e-commerce and tech giant recently disclosed a $3.9 billion plan to acquire One Medical, a chain of primary care clinics in the US, backed by private equity firm Carlyle Group.

The acquisition marks Amazon’s latest investment in the healthcare sector after launching Amazon Care, a virtual health service, in 2019 to treat its employees and their families. The service offers virtual visits, in-person primary care visits and prescription delivery.

Amazon also bought online pharmacy PillPack in 2018 for $753 million. The service, now called Amazon Pharmacy, delivers medications to customers.

Meanwhile, an analysis by The New York Times suggests that Amazon’s purchase of One Medical would provide Amazon access to more data as the target company has 15 years’ worth of medical and health-system data. The deal has so far been met with criticism including from US Senator Amy Klobuchar, who called on the Federal Trade Commission to “thoroughly investigate” the proposed deal due to anticompetitive concerns.

On the other side of the coin, the big tech giants’ efforts to grab a share of the digital healthcare market could be said to improve health systems globally and helps bridge the gap in data sharing, allowing the healthcare and medical sector including drugmakers to fast-track drug development.

“Rising health-care costs and the shift to new payment models in this $4 trillion market will increase the focus on care outside of traditional settings, which will rely heavily on connected technologies,” Bloomberg Intelligence said in an analysis in March.