It’s no secret Jeff Bezos has been looking to crack health care. But nobody expected him to pull Warren Buffett and Jamie Dimon, too.
News Tuesday that Bezos’s Amazon.com Inc.. , Buffett’s Berkshire Hathaway Inc. and JPMorgan Chase & Co.. , headed by Dimon, plan to combine forces to change how health care is provided to their combined 1 million U.S. workers sent shock waves through the health-care market.
The plan, although in early stages and concentrated solely on the three giants’ personnel for now, seems almost sure to set its sights disrupting the wider industry. It’s the first big move by Amazon from the sector after months of speculation that the internet behemoth might make an entrance. The Amazon-Berkshire-JPMorgan collaboration will likely pressure profits for middlemen from the health-care distribution chain.
Details were scant in a short joint statement on Tuesday. The three companies said they plan to set up a new independent firm “that’s free from profit-making incentives and constraints. ”
It was enough to sink health-care stocks. Express Scripts Holding Co.. And CVS Health Corp., that manage pharmacy benefits, slumped 6.9 percent and 4.9 percent, respectively. Health insurers like Cigna Corp. and Anthem Inc. and biotechnology firms also dropped.
The group announced the news in the very early stages because it plans to hire a CEO and start partnering with other associations, according to a individual familiar with the issue. The campaign could be concentrated internally first, and the businesses might bring their data and bargaining power to keep on decreasing health-care outlays, the individual said. Possible ways to reduce costs include providing more transparency over the prices for doctor visits and laboratory tests, as well as by enabling direct purchasing of some medical things, the individual said.
“I’m favor of anything that can help transfer the markets a bit, incentivizes competition and puts pressure on the big insurance carriers,” stated Ashraf Shehata, a partner in KPMG LLP’s health care and life sciences advisory clinic from the U.S. “A employer coalition can do a great deal of things. You can encourage reimbursement models and provide incentives for the use of technologies. ”
“Hard as it may be, reducing health care’s weight on the market while enhancing outcomes for workers and their families are worth the effort,” Bezos said in the statement. “Success is going to require gifted experts, a beginner’s thoughts, and a long-term orientation. ”
The first focus of this new company will be on technology solutions that will provide U.S. workers and their families using simplified, high quality and clear health care at a reasonable costs. From the statement, JPMorgan CEO Dimon said that the initiative could ultimately expand beyond the three businesses.
“Our objective is to produce solutions that benefit our U.S. workers, their families and, possibly, all Americans,” he explained.
Amazon, Berkshire and JPMorgan are among the largest private employers in the U.S. Plus they’re one of the most valuable, with a combined market capitalization of $1.6 trillion, according to data compiled by Bloomberg.
This isn’t the very first time large businesses have teamed up in an effort to handle health-care costs. International Business Machines Corp., Berkshire’s BNSF Railway and American Express Co. were one of the founding members of their Health Transformation Alliance, which currently includes about 40 big businesses that want to change health care. The group ultimately partnered with existing industry players including CVS and UnitedHealth Group Inc.’s OptumRx.
The most recent effort has been spearheaded by Todd Combs, who will help manage investments at Berkshire; Marvelle Sullivan Berchtold, a managing director of JPMorgan; and Beth Galetti, a senior vice president for human resources at Amazon.
Buffett handpicked Combs at 2010 as one of the two key stockpickers. Combs, 47, has been taking on a larger role at Berkshire in the past several decades, and Buffett has stated that Combs and Ted Weschler, who also will help manage investments, will finally manage the company’s whole portfolio. Combs also joined JPMorgan’s board in 2016.
Sullivan Berchtold joined JPMorgan in August after eight years at the Swiss pharmaceutical firm Novartis AG, where she was recently the global head of mergers and acquisitions, according to her LinkedIn profile.
One of the highest ranking women at Amazon, Galetti has worked in human resources at the e-commerce giant since mid-2013, becoming senior vice president nearly two decades ago, according to her LinkedIn profile. As of late 2017 she was the only woman on Amazon’s elite S-team, a bunch of just over a dozen senior executives who meet regularly with Bezos, according to published reports. Previously Galetti worked in planning, operations and engineering at FedEx Express, the freight airline of FedEx Corp.. She has a diploma in electrical engineering from Lehigh University and an MBA from Colorado Technical University.
The management group, location of the headquarters and other operational information will be announced later, the firms said.
Health-care spending was estimated to account for approximately 18 percent of the U.S. market last year, far more than in other developed nations. Buffett has long bemoaned the cost of U.S. health care. This past year he came out in favor of drastic changes from the U.S. health program, telling PBS NewsHour that government-run health care is probably the best strategy and could bring down costs.
“The ballooning costs of health care act as a starving tapeworm about the American market,” Buffett stated in Tuesday’s statement. “Our group doesn’t come to the problem together with replies. But we also don’t accept it as inevitable. ”