Table of contents

• Key takeaways
• Acquisitions: Retailers retreat amid profitability constraints
• Partnerships: Big Tech partnerships continue to push AI advancements in healthcare
• Investments: Investments pick up with Big Tech taking the lead
• Focus areas: R&D activities took center stage among key focus areas
• Appendix

Healthcare activities of Big Tech and retail players in Q2 2024

Note: Activities refer to initiatives by the above companies across industries under SPEEDA Edge’s Health & Wellness and Pharma & Life Sciences verticals

Source: SPEEDA Edge research

Key takeaways

• The race for healthcare AI models heated up: During the quarter, Alphabet, through Google and DeepMind, released an open-access paper on Med-Gemini, a family of large multimodal models (LMMs) specifically built for the healthcare domain. In this release, Google claimed that Med-Gemini is more accurate than any other LMM on the market, including GPT-4, and can reduce the cognitive load for clinicians by efficiently extracting and analyzing information from vast amounts of patient data. Meanwhile, Meta's open-source large language model (LLM), Meta Llama 3, gained traction during the quarter as healthcare and life science sectors showed interest in exploring its possibilities to improve patient lives.

• Apple made headlines, as its Vision Pro was used during a shoulder replacement surgery: eXeX, an AI-enhanced surgical logistics software company, made history by incorporating the Vision Pro spatial computing headset during a reverse total shoulder arthroplasty. The eXeX software, integrated with Vision Pro, provided holographic access to surgical information, improved workflow and equipment management, and enabled touch-free interaction without compromising sterility. This demonstrates the potential of AI and spatial computing to enhance surgical procedures, improve efficiency and accuracy, and ultimately, patient outcomes.

• Walmart and Walgreens announced the scaling down of healthcare businesses: During Q2 2024, Walmart announced 1) the intention to shut down Walmart Health and Walmart Health Virtual Care, stating they were not financially sustainable, and 2) the sale of MeMD to Fabric for an undisclosed amount. This marked the exit of the retail giant from the virtual health market due to pressures of financial sustainability. Walgreens also announced intentions to reduce its stake in primary care clinic chain VillageMD and to close a “significant” number of underperforming stores over the next 3 years. 

• Overall activity witnessed a slight increase during Q2 2024 (31 activities tracked in Q2 2024 vs. 30 in Q1 2024): Big Tech and retailers carried forward momentum, making up for a similar share of activity compared with the previous quarter (87% and 13%, respectively).

• Although at a reduced level, Alphabet continued to dominate activity in the healthcare space: The tech giant accounted for 44% of all Big Tech activity and 38% of all healthcare activity. Most of its activity continued to focus on primary care, while activity around pharma automation also prevailed. Specifically, Telehealth and AI Drug Discovery were the main areas of interest during the quarter, with other areas such as Clinical Decision Support Systems, Hospital Management, Mental Health Tech, and Age Tech gaining some traction.

• Investment activity picked up (7 in Q2 2024 vs. 4 in Q1 2023). These included Google’s VC arms investing in Midi Health Rad AI (a healthcare GenAI solutions provider), and Heyday Health  (primary care for adults). Among the retailers, CVS Health Ventures made a strategic investment in Thyme Care to support the national expansion of its value-based cancer care model. 

• AI-powered R&D attracted more attention: After integrating AI to automate and streamline administrative operations, health systems are shifting their focus toward more advanced applications of AI, specifically for R&D initiatives. In particular, Precision Medicine and AI Drug Discovery gained traction, with most R&D activity concentrated in these areas.

Number of activities by company during Q2 2024

Acquisitions: Retailers retreat amid profitability constraints

Analyst Take: Following a tough year for retail healthcare, organizations such as Walmart and Walgreens' VillageMD are closing and scaling down their operations. It was also reported that CVS Health was seeking a private equity partner to fund growth at Oak Street Health, a primary care provider it acquired a year ago, to support plans to expand the clinical network. Lack of profitability has been the main reason for these drawbacks. For example, Walgreens incurred a loss of USD 5.8 billion in the second fiscal quarter of 2024, mainly due to the devaluation of VillageMD. In these circumstances, speaking at a conference, Walgreens Boots Alliance's Executive Vice President and US Healthcare President Mary Langowski emphasized the need to differentiate between healthcare models, such as value-based primary care, fee-for-service clinics, and urgent care clinics. She added that these models are being tested and that there are questions surrounding the role of retail healthcare. These drawbacks could significantly impact access to care for thousands of patients across the US. 

On the contrary, Best Buy was reported to be shifting its focus toward the healthcare sector with expectations to grow faster in fiscal 2025.

Retail

• In April 2024, Walmart announced its intention to shut down its health centers and virtual health divisions, Walmart Health and Walmart Health Virtual Care, stating they were not financially sustainable. In June 2024, the company exited the virtual health market with the sale of MeMD to Fabric for an undisclosed price. Walmart acquired MeMD in 2021 to venture into virtual medical and behavioral health services. As of June 2024, the company provided its virtual behavioral, urgent, and primary care services to 30,000 corporate, institutional, and health plan partners and 5 million members. The retail giant also announced that its 51 health centers across the US would close down by June 28, 2024.

• Walgreens also announced that the company planned to reduce its stake in primary care clinic chain VillageMD, no longer remaining its majority owner. This decision follows the closure of 60 VillageMD sites in 2023 as part of its effort to cut costs by at least USD 1 billion. Walgreens became the majority owner of VillageMD in 2021 through a USD 5.2 billion investment. Under its ownership, VillageMD expanded, notably with the USD 8.9 billion acquisition of Summit Health in 2023.

Partnerships: Big Tech partnerships continue to push AI advancements in healthcare

Analyst Take: The recent interest in integrating AI and GenAI tools into clinical workflows has fueled partnerships in the healthcare space. In October 2023, Microsoft launched new AI and GenAI features specifically targeting the sector. In December 2023, Alphabet, through Google Cloud, launched MedLM, a family of GenAI models specifically designed for medical applications. These launches resulted in more Big Tech partnerships during Q1 2024.

The race for healthcare AI models was heating up during Q2 2024. In addition to Google's and Microsoft’s offerings, Meta’s Llama 3 LLM also made notable strides, empowering researchers, developers, and companies in the healthcare and life sciences sectors to create innovative applications to improve patient lives. These developments are expected to spur further collaboration between Big Tech and health systems.

Big Tech

• Alphabet persisted in its partnerships to embed AI technologies within the healthcare domain. During the quarter, the tech giant remained committed to accelerating AI drug discovery and scientific research, and through Google Cloud, established partnerships with Path AI, TetraScience, and VantAI to develop AI models to advance research capabilities and clinical trial outcomes. The company, through Google Cloud, also sought to broaden AI applications in the Telehealth space through partnerships established with Pager Health and BrightInsight. Both these partnerships aimed to leverage Google Cloud's GenAI models to streamline healthcare practices. In addition, the company partnered with Bayer to develop an AI-powered platform to assist radiologists in diagnosing patients faster and more effectively. Alphabet’s AI push was further strengthened, as it partnered with Cognizant to unveil a new suite of healthcare LLMs on Google Cloud's GenAI platform. These models aim to streamline administrative processes and improve the quality of care and services delivered to patients. 

• Microsoft picked up pace, with AI technologies being the main focus. In the Precision Medicine space, the company partnered with Providence Health Network and the University of Washington to introduce Prov-GigaPath, an AI-powered digital pathology tool for cancer diagnostics. The tool consists of an ML model claimed to be the result of one of the largest AI training efforts in real-world, whole-slide tissue analysis. In a separate partnership with Providence, the tech giant is also leveraging its GenAI capabilities to synthesize complex medical data from multiple sources to improve cancer care. Microsoft also teamed up with Enveda Biosciences for AI drug discovery. As a result, Enveda will leverage Microsoft Azure's computing resources to scale its GenAI models, including PRISM, to support its efforts in discovering new drugs from natural sources. In addition, the tech giant partnered with Topcon Healthcare (THI) to improve healthcare access, cost, and quality by leveraging its AI and cloud computing expertise to power THI's Harmony platform, a connected data management system that enables pre-screening for systemic and neurological diseases through non-invasive eye scans.

• Amazon also collaborated to make advancements in AI drug discovery. Through AWS, the company partnered with EvolutionaryScale to leverage AWS' infrastructure and GenAI capabilities to offer the latter’s proprietary ESM3 model to the healthcare community to promote advancements in fields such as drug discovery and carbon capture. Apart from AI, the company collaborated with Philips to transition its IntelliSpace Radiology platform to a cloud-based version hosted on AWS and partnered with Beauty Tech company Function of Beauty to offer its hair care products through Amazon's ecommerce platform.

• Oracle’s EHR modernization platform continued to fuel partnerships in the healthcare space. During the quarter, the company extended its partnership with the Department of Veterans Affairs to migrate from its legacy VistA EHR system to Oracle Health's off-the-shelf EHR system.

Summary of Big Tech players’ partnerships in Q2 2024

Note: The collaboration between the White House, Microsoft, and Google to bolster cybersecurity defenses in rural hospitals across the US and collaborations to expand Microsoft's healthcare AI consortium have not been considered

Source: SPEEDA Edge research

Note: The collaboration between the White House, Microsoft, and Google to bolster cybersecurity defenses in rural hospitals across the US and collaborations to expand Microsoft's healthcare AI consortium have not been considered

Retail

• Walgreens marked its first clinical collaboration with a health system in New England. The retail giant teamed up with Hartford HealthCare to open three clinics offering primary care, screenings, vaccinations, and telehealth consultations, accommodating appointments and walk-in visits. Another two clinics are set to open in Norwalk and Manchester in July and August, respectively. In addition, Walgreens also partnered with pharmaceutical giant Boehringer Ingelheim to leverage its nationwide presence and community relationships to identify and enroll potential participants for Boehringer Ingelheim's Phase III clinical trials of survodutide, a drug candidate for treating obesity and type two diabetes.

Summary of retail players’ partnerships in Q2 2024

Source: SPEEDA Edge research

Investments: Investments pick up with Big Tech taking the lead

Analyst Take: Alphabet, through its venture capital arm Gradient Ventures, is focused on making strategic investments in early-stage startups in healthcare, FinTech, and other industries that can benefit from innovative AI-powered solutions. As the company, through Google Cloud, continues to deliver new AI-enabled solutions aimed at healthcare and life sciences, investments in such potential early-stage startups allows the tech giant to be at the forefront of innovation by integrating cutting-edge technology at a faster pace.

Big Tech

• Alphabet kept its investment momentum going strong. The tech giant, through Google Ventures, took part in Midi Health’s USD 60 million Series B funding round to support the expansion and diversification of its service lines and scale up its operations. The company, through Gradient Ventures, also continued to focus on early-stage startups within the healthcare space. This includes investments in Rad AI and Heyday Health to accelerate growth and expand their operations. 

• Amazon, through AWS, committed USD 10 million to support research on pediatric health and rare diseases. As part of the initiative, the company granted USD 1 million each to the Children's Brain Tumor Network; the Children's National Hospital in Washington, DC; and the Nationwide Children's Hospital in Columbus, Ohio. The remaining USD 7 million is earmarked to fund projects that accelerate pediatric research, advance maternal-child health, and empower the pediatric workforce and caregivers.

Retail

• For the third consecutive quarter, CVS Health remained the only retailer pursuing investments in the healthcare space. The retail giant, through CVS Health Ventures, made a strategic investment in Thyme Care to support the national expansion of its value-based cancer care model through contracts with health plans, risk-bearing providers, and oncologists.

Focus areas: R&D activities took center stage among key focus areas

Analyst Take: R&D activity witnessed a surge, becoming the main focus area during the quarter. In contrast, activities around care delivery and management, which were the main focus areas in the previous quarter, have slowed down. The varying interest in integrating AI in these areas has been the main contributor to this shift. This indicates that, after integrating AI to automate and streamline administrative operations, health systems are now shifting their attention toward more advanced applications of AI in the healthcare space.

Note: 1) Comprises data from Health & Wellness and Pharma & Life Sciences hubs; 2) darker colors indicate greater intensity; 3) arrows show the movement of activity compared with the previous quarter; 4) definitions of focus areas are given in Appendix 2

Appendix

1. Network of large incumbents in primary care

2. Definitions of focus areas