By Anna Wilde Mathews, Dana Cimilluca and Emily Glazer
Some health-care companies have complained to JPMorgan Chase
& Co. about the bank's new health-care partnership with
Amazon.com Inc. and Berkshire Hathaway Inc., worried that it could
cut into their business.
JPMorgan Chief Executive James Dimon got involved personally,
speaking with some health-care executives to allay fears that the
bank would become their rival, people familiar with the matter
said.
The new initiative, which was announced last Tuesday, aims to
overhaul health care for the three companies' legions of employees.
It sent shock waves through a number of health-care stocks. Shares
of health insurers UnitedHealth Group Inc., Cigna Corp., Humana
Inc., Anthem Inc. and Aetna Inc. all dropped. Other sectors of the
health-care industry also felt the sting.
At least two of the industry's five biggest insurers voiced
concern to JPMorgan officials following the announcement, some of
the people said.
Mr. Dimon assured clients that the initiative is designed only
to serve the employees of the three firms in the partnership. So
did some of the firm's health-care bankers, who get paid handsomely
to help clients with mergers and other deals and worry the move
could cost them business.
JPMorgan's health-care bankers only learned of the plan around 9
p.m. the evening before it was announced, according to people
familiar with the matter. After the plan became public, some of
these bankers fielded calls from clients concerned and confused
about the impact.
The bankers reiterated Mr. Dimon's message to clients. They
explained that the initiative is akin to a group-purchasing
organization, a type of setup used by hospitals to buy supplies, so
the companies can get better deals for their employees, some of
these people said.
JPMorgan, the largest U.S. bank by assets, is eager to avoid
even a small disruption to its health-care investment-banking
franchise, a powerhouse on Wall Street that took in $682 million in
revenue in the U.S. last year. Its leading market share of 14% was
trailed by that of Goldman Sachs Group Inc. at 10.6% and Morgan
Stanley at 7%, according to Dealogic.
JPMorgan spokesman Brian Marchiony said feedback from
health-care industry has been "overwhelmingly positive." The bank
has "had hundreds of phone calls and emails from client CEOs,
doctors and health-care administrators looking to see how they can
get involved." He added: "We see this as an opportunity to work
with the industry to tackle the issues facing our country."
On a Thursday conference call with industry analysts to discuss
earnings, Cigna CEO David Cordani said such employer moves create
"more opportunity versus less for us, because we seek to be an
integrated partner from a services standpoint."
Though details of the project are scant, the idea is for the
three companies to launch a not-for-profit company to reduce costs
and improve the health-care experience for hundreds of thousands of
U.S. employees.
A small team largely including members of JPMorgan's
corporate-strategy group, which delves into big-impact projects
across the firm, quietly worked on the plan for several months with
Mr. Dimon and counterparts from Amazon and Berkshire, people
familiar with the process said. Marvelle Sullivan Berchtold, a
managing director in the strategy group, is JPMorgan's point
person. She joined the bank in August after stints as global head
of mergers and acquisitions for pharmaceutical company Novartis AG
and as a senior official at GSK Consumer Healthcare, a division of
drugmaker GlaxoSmithKline PLC.
The bank isn't getting into business with Amazon, which earlier
jolted health-care companies with moves like adding health-care
supply options to its business-to-business marketplace. Worries
about a potential Amazon entry into the pharmacy-services business
were a factor in CVS Health Corp.'s $69 billion proposed
acquisition of insurance giant Aetna.
JPMorgan bankers were also taking incoming calls from technology
companies, including health-care tech firms, intrigued by the
initiative's potential to disrupt the industry, a person familiar
with the matter said, adding that there is a possibility for
additional business from those firms.
At one stage, there was discussion about whether the venture
should take over administration of employees' pharmacy and
health-insurance benefits from the current insurers and
pharmacy-benefit managers, according to a document from December
reviewed by The Wall Street Journal. But the document was an
initial proposal and that idea isn't currently on the table, people
familiar with the matter have said.
The December document also took aim at some of the industry's
middlemen, saying that past efforts to address health costs didn't
work "because they conceded the existence and role of
intermediaries like PBMs, insurance administrators, wholesale
distributors and pharmacies, which have a vested interest in
maintaining the status quo." One person with knowledge of the
matter has said the focus now is on helping the current vendors
work better, not on replacing them.
In 2017, JPMorgan spent $1.25 billion on medical benefits for
employees based in the U.S., where the medical plan covers almost
300,000 individuals, including employees and their family members,
the bank disclosed earlier in January.
Write to Anna Wilde Mathews at anna.mathews@wsj.com, Dana
Cimilluca at dana.cimilluca@wsj.com and Emily Glazer at
emily.glazer@wsj.com
(END) Dow Jones Newswires
February 04, 2018 19:49 ET (00:49 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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