Amazon, Berkshire, JPMorgan to Partner on Health Care--Update
January 30 2018 - 9:11AM
Dow Jones News
By Cara Lombardo
Amazon.com Inc, Berkshire Hathaway and JPMorgan Chase & Co.
are forming a company to figure out how to reduce health-care costs
for their hundreds of thousands of U.S. employees, the three
companies said Tuesday.
"The ballooning costs of health care act as a hungry tapeworm on
the American economy," Berkshire Chief Executive Warren Buffett
said in prepared remarks. "Our group does not come to this problem
with answers. But we also do not accept it as inevitable."
The new company will focus on technological solutions that can
provide simplified and transparent health care for the three
companies' U.S. employees at a lower cost.
The three companies together have more than a million employees,
though not all of them work in the U.S. The companies didn't say
how much money was earmarked for the initiative or whether it would
grow to include other employers.
Amazon has already triggered concerns for the broader
health-care industry due to its as-yet unclear ambitions in the
space, factoring into CVS Health Corp.'s $69 billion bid last year
for insurance giant Aetna Inc. Specifically, Amazon has been eyeing
an entry into the pharmacy-services industry and has added
health-care supply options to its business-to-business marketplace
offering.
Shares of companies across the health-care industry including
pharmacy-benefit managers, health-insurance companies and
drugmakers dropped sharply in premarket trading Tuesday following
the announcement.
CVS shares dropped 7.6% in premarket, while Aetna shares dropped
3%.
Todd Combs, an investment officer at Berkshire Hathaway,
Marvelle Sullivan Berchtold, a managing director of JPMorgan and
Beth Galetti, a senior vice president at Amazon, are overseeing the
company's formation. Mr. Combs joined JPMorgan's board of directors
in 2016.
A longer-term management team, headquarters location and
operational details of the new company will be announced later, the
companies said.
Amazon had more than 540,000 employees globally as of October as
it acquired grocery chain Whole Foods. The company offers full-time
warehouse employees health-care benefits.
The company has said it is adding 100,000 full-time jobs in the
U.S. through mid-2018, most in warehouses, and it is adding 50,000
corporate jobs over 10 to 15 years at its planned second North
American headquarters.
Berkshire, which had 367,671 employees at the end of 2016,
allows its 60-odd operating businesses to run independently, and it
is rare for the company to mandate anything for all employees at
its subsidiaries. Only about 25 people work in the company's Omaha,
Neb., headquarters.
Mr. Buffett, a longtime Democrat, has criticized U.S.
health-care costs in the past and said he supports a single-payer
system. At Berkshire's annual meeting last year, he noted that
medical costs had increased as a percentage of U.S. GDP in recent
decades, while taxes as a percent of GDP had fallen.
The rising cost of health care "is a problem the society is
having trouble with and is going to have more trouble with,
regardless of which party is in power," he said at the May annual
meeting. "If you talk about world competitiveness of American
industry, it's the biggest single variable, where we keep getting
more and more out of whack with the rest of the world."
The announcement is part of a larger trend of companies --
particularly tech giant CEOs -- taking it upon themselves to work
on bigger societal projects, like sending people to space. Amazon
Chief Executive Jeff Bezos founded Blue Origin LLC a decade ago to
make reusable rockets and to lower launch costs. Tesla Inc. Chief
Executive Elon Musk has also formed a space company and has been
working on a so-called hyperloop, a system for high-speed
transportation in a near-vacuum state that takes place in
miles-long tubes.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
January 30, 2018 08:56 ET (13:56 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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