Whenever Amazon.com threatens to enter a market sector, the resultant scare brings falling stock prices for companies within that segment. That is exactly how it played out Tuesday with the announcement that Berkshire Hathaway, JPMorgan Chase, and Amazon.com, three of the largest organizations in the country, are joining forces to form a new non-profit healthcare company.
At the close of business on Tuesday, Financial Times reported:
“The stock prices of the country’s five big health insurers — UnitedHealth, Anthem, Aetna, Humana, and Cigna — had dropped by between 3% and 7.2% by the close of trade in New York. The sell-off also hit PBMs, which act as middlemen that negotiate drug prices on behalf of insurers and employers, but which have been accused of using the savings to bolster their own profits. Express Scripts, the largest standalone PBM, lost 3.2% while CVS Health, the pharmacy group that operates the Caremark PBM, shed 4.1%. Shares of large drug makers also tumbled, as investors fretted they would struggle to maintain premium prices, with Pfizer, AbbVie, and Merck losing between 1.6% and 5.3%.”
It is worth a mention that before Tuesday’s news, health-care stocks had been on a rampant upward trend over the past year with nearly a 30% gain for the S&P’s health-care sector. The only group to outperform healthcare in the past 12 months was the tech sector. The strong performance of the stock market combined with the out of control rising healthcare costs helped float all boats in the industry. Drug manufacturers, wholesalers, pharmacy-benefit managers, hospital operators and insurers all have benefited from higher prices throughout the system.
According to the press release, the focus of this new venture is to reduce healthcare costs and find ways to deliver more efficient medical services via new technology solutions in order to “provide simplified, high-quality and transparent healthcare at a reasonable cost to over half a million U.S. employees and their families.”
The most current data available shows health-care spending in the U.S. grew 4.3% to $3.3 trillion in 2016, accounting for an 18% share of the nation’s gross domestic product, according to the U.S. Centers for Medicare and Medicaid Services. Berkshire Hathaway Chairman and CEO, Warren Buffet said:
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. said: “Our people want transparency, knowledge, and control when it comes to managing their healthcare.” Jeff Bezos, Amazon founder, and CEO added: “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
In December Liberty Nation reported on the impact of new unconventional Mega-mergers in healthcare:
“None of this is simple, and it will not happen overnight. Healthcare is in a state of chaos and is wholly mired in the swamp. The problems go far beyond increased insurance premiums, limited choice of providers, and exorbitant pharmacy prices. There are a plethora of complicated and dysfunctional tentacles causing the demise of our healthcare system.
Any movement to think “outside of the box” should be as welcomed as hope for the future. Sure, it is risky to believe that consumers might benefit from these mega-mergers, but what choice do we have? Let’s face it: Someone has to do something, and we certainly cannot afford to wait for Congress to get its act together. Maybe, just maybe, the heating up of these types of mega-mergers will be the beginning of the end of healthcare as we know it today.”
The Amazon, Berkshire Hathaway, JPMorgan Chase partnership is in its early planning stages, and the structural details will emerge at a later date, including the long-term management team, headquarters location and key operational information. It will be very interesting to see how this plays out and impacts the healthcare landscape. Maybe, just maybe we are witnessing history in the making.
