Coverage: Amazon, Berkshire, JP Morgan partner on health care

Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co. said on Tuesday they will form a company to cut health costs for hundreds of thousands of their employees.

Caroline Humer and David Henry of Reuters had the news:

The move by three of the best-known U.S. business leaders – Amazon’s Jeff Bezos, Berkshire’s Warren Buffett and JPMorgan’s Jamie Dimon – would take on the world’s most expensive healthcare system, whose mounting costs have hurt corporate profit. Shares of U.S. healthcare companies fell across the board.

The new, not-for-profit venture will initially focus on technology for “simplified, high-quality and transparent healthcare” for their more than 500,000 U.S. employees, the companies said. They did not elaborate on their strategy, but said they are searching for a chief executive officer.

Healthcare industry experts say the new entity could eventually negotiate directly with drugmakers, doctors and hospitals and use their vast databases to get a better handle on the costs of those services.

That could undercut the industry’s “middlemen,” from health insurers to pharmacies and benefits managers.

Carolyn Y. Johnson of The Washington Post reported that health care stocks dropped on the news:

Major health company stock prices tumbled on the news, and the announcement stirred excitement — and questions — about how the three companies could bring their clout to containing costs in the massive employer-sponsored health insurance market, which provides coverage to approximately 160 million Americans.

According to the Kaiser Family Foundation’s survey of employer health benefits, health insurance premiums have been rising faster than wages. Between 2012 and 2017, workers’ earnings grew by 12 percent, while premiums went up by 19 percent. Between 2007 and 2012, premiums increased twice as fast as workers’ earnings.

“The U.S. health-care system is unsustainable in terms of its costs, and the entire debate by political leaders — whether it is Democrats or Republicans — has focused on repairing and replacing Obamacare and the ideological differences,” said John Sculley, who formerly led Apple and Pepsi-Cola and is now chief marketing officer of RxAdvance, a health tech company. “To have three of the most respected CEOs in the world step up and say that their companies are going to work together to focus on the real issues, of how do you make the U.S. health-care system sustainable and a better delivery of service than what we have today… it’s very positive.”

James F. Peltz, Jim Puzzanghera and Noam N. Levey of the Los Angeles Times noted that details of the new company are still to be determined:

The management team, location of the headquarters and other operational details will be announced later, the companies said.

The new venture probably won’t affect the polarized healthcare debate in Washington, but could alter the dynamics of the issue down the line if the companies come up with some innovative ideas, said Neil Trautwein, a vice president at the National Retail Federation trade group who lobbies Congress on healthcare issues.

“It’s not an immediate debate-disrupter. It takes quite a bit to move what has been a highly, highly regulated marketplace,” said Trautwein, a former aide to Senate Majority Leader Mitch McConnell (R-Ky.).

“But if these three companies, each of which have been extremely innovative, succeed in driving major change, then I think you’ll see private-sector employers get behind it.”