Amazon jumped into the grocery business over the summer after spending $14 billion for Whole Foods Market Inc. Now the e-commerce behemoth is trying their hand in health care and they are teaming up with two financial giants. Amazon, along with investment house Berkshire Hathaway and New York bank JPMorgan Chase, are creating a new health care company. The announcement of the unexpected partnership sent shockwaves to the health care industry and caused several stocks to fall.
The trio of extremely profitable companies are lending their “complementary expertise” to create a health care business that helps their U.S. employees find quality care “at a reasonable cost.” The company will be independent and “free from profit-making incentives and constraints.” The new venture will focus on technology that provides “simplified, high-quality and transparent” care. The heads of each of the three companies, Amazon’s Jeff Bezos, Berkshire’s Warren Buffet, and JPMorgan’s Jamie Dimon, made the announcement on Tuesday, but did not offer specifics on their new alliance.
As of right now, this is solely for the employees of the three companies, but it could expand into a full-fledged health care company that services all Americans. “The ballooning costs of (health care) act as a hungry tapeworm on the American economy,” Buffett said in a prepared statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.” JPMorgan’s Dimon said, “our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”
The news of a possible competitor with immense financial backing and access to state-of-the-art technology caused shares in health care companies to fall. Shares of insurers UnitedHealth Group dropped 6%, Cigna fell 6%, and Aetna was down 3% in early trading. Investors are worried that the new health care company will pose a legitimate threat to established enterprises by finding more efficient methods of delivering satisfying health care. There is also a possibility that Amazon will soon enter the pharmacy business, causing drug distributor Express Scripts to fall 8%, CVS Health tumbling 7%, and Walgreens Boots Alliance dropping 5%.
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Bezos in the release. “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.” Dimon added, “Our people want transparency, knowledge and control when it comes to managing their healthcare.”