The Daily Update - Disrupting the US healthcare industry

An investment bank, an online retailer and a conglomerate walk into a bar and ask for a cocktail called a ‘healthcare policy’ that is simple, transparent and reasonably priced. The bartender says, ‘Sorry we’ve only ever served ‘em complicated, murky and expensive’... So the three punters walked out and mixed one up themselves.

This pretty much sums up yesterday’s announcement that JPMorgan, Amazon and Berkshire Hathaway (the three unhappy punters) plan to set up a non-profit healthcare company. It is a welcome initiative that combines the complementary forces of three heavyweight US corporates to address ‘The ballooning costs of healthcare [which] act as a hungry tapeworm on the American economy’ according to Warren Buffett of Berkshire Hathaway. Although it was clearly not welcomed by many healthcare stocks which fell between 3% and 11% on the news (and a general sell-off in stocks), along with some big brand pharmaceuticals who could face the bargaining power and disruptive forces that the likes of Amazon are well known for.

Mr Buffett contended further, ‘we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes’. Their plans will, at least initially, address their combined almost 1 million US employees but those that have anticipated Amazon’s move into the healthcare industry for some time now expect that the future implications of this announcement will be much wider. JPMorgan CEO Jamie Dimon affirmed this view stating, ‘The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans’.

According to the FT, ‘Annual premiums for employer-sponsored family health coverage reached $18,764 last year, up 3 per cent from 2016’. For now the venture is expected to start simple, reducing costs using big data analytics, but given these companies’ complementary, technical, financial and insurance expertise it might only be a few years until they craft a full-fledged alternative to the current exorbitant private costs and uncertain public healthcare protections.