Business titans set to shake up health care
New alliance sets up high-stakes showdown with industry titans
Berkshire Hathaway, JP Morgan Chase and Amazon could cause seismic shift
A budding alliance of Amazon, Berkshire Hathaway and JP Morgan Chase could eventually deliver savings and better health care for patients while posing a serious threat to medical companies that are reaping big profits off of the status quo.
Business titans Jeff Bezos, Warren Buffett and Jamie Dimon announced Tuesday that their companies would form an independent health care company, leaving insurers, drugmakers and pharmacy benefit managers to face a potentially seismic shift in the marketplace.
The announcement is one of the most important in years, in terms of both health care and the U.S. economy, said John Sculley, former CEO of Apple and current chair and chief marketing officer for Rx Advance, a drug benefit management company.
“They’re saying ‘There’s got to be a better way,’ ” he said.
Had this come from anyone but these three, the response would have been skeptical. “But this is Bezos, Buffett and Dimon,” Sculley said.
The announcement sets up a highstakes showdown between the world’s most powerful health care companies and a group that includes two of the world’s three richest people, Amazon CEO Bezos and Berkshire CEO Buffett, as well as one of its most powerful executives, JP Morgan CEO Dimon.
Round 1 goes to the new alliance, whose companies include about 1 million employees and have a collective market value of more than $1.6 trillion. After the announcement Tuesday, the stocks of several major health care companies — including insurer United Health Group, pharmacy benefit manager Express Scripts, drugmaker Amgen and drugstore chain CVS Health, the recent buyer of insurer Aetna — suffered losses.
The executives behind the unnamed coalition said they would create a company “free from profit-making incentives and constraints” to focus initially on “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost.”
“This is really promising because it’s
pretty clear the health care system in the United States doesn’t really work effectively,” said Robert Atkinson, president of the Information Technology and Innovation Foundation and author of the upcoming book Big Is Beautiful. “It’s expensive, it doesn’t really provide universal care and coverage, and there are quality issues.”
Experts believe that the coalition could help provide critical information on hard-to-understand health care costs and potentially undercut the current market for high-priced drugs.
“This is not about making money,” said Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan. “They really could be a disrupter in terms of thinking about things differently.”
To be sure, details about the new coalition are scarce. And the hurdles are steep.
“Many have tried, but few have succeeded,” said Ted Dacko, a consultant who sold a health care technology company focused on delivering savings to Johnson & Johnson. “Their goal was explained, but their plan was not.”
The immediate and perhaps most pressing goal for Amazon, Berkshire and JPMorgan is controlling their own significant health care expenses.
Those growing costs “act as a hungry tapeworm on the American economy,” Buffett said in a statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable,” he said.
Consumer advocates, meanwhile, say people deserve easy and comprehensive access to their electronic health care records while also preserving privacy — and this coalition could potentially address that.
“The health care system needs better transparency around both cost of care and quality of care, and while the system is moving to make improvements, the average employee and consumer doesn’t have a lot of vision into that,” said Martin Arrick, a credit analyst who tracks not-for-profit health care firms for S&P Global Ratings.