Even while industry observers are mulling the potential impact of the CVS Health-Aetna proposed merger, which brings an insurer together with a pharmacy/pharmacy benefit manager, they will now have to chew on the impact of a conglomeration of three big payers: Amazon, Berkshire Hathaway and JP Morgan Chase. The three are setting up an independent, nonprofit company to manage their employees’ healthcare costs. Plans are very sketchy at the moment; the companies only say that it will offer “technology solutions that will provide US employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” A senior executive from each of the firms will lead the effort.
Although the initial goal is managing the companies’ employee healthcare costs (collectively, they have 1.2 million workers, although the US component is variously estimated between 500,000 and less than 1 million), there is potential for a national model: “Our people want transparency, knowledge and control when it comes to managing their healthcare,” said Jamie Dimon, chairman and CEO of JPMorgan Chase. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our US employees, their families and, potentially, all Americans,” he added.
Wall Street greeted the news by hammering the stock of “middlemen” companies, especially Cigna, which was down 7% during the day of the Jan. 30 announcement. Health insurers, pharmacy benefit managers, chain pharmacies and major drug wholesalers were also down, between 1.8 and 5.2% (it was, however, a down day for the entire market, with the Dow Jones dropping 1.37%).
According to various press reports, there is expertise each of the companies brings to the effort: Berkshire’s involvement in insurance and reinsurance; JP Morgan in managing health spending accounts and finance and—the gorilla in the room—Amazon, which is already being watched closely for its potential engagement in managing drug spending—if not actually becoming a retail pharmacy. An internal employee announcement reportedly calmed employees at JP Morgan that no rapid switchout of insurers or healthcare providers was contemplated.
Some press reports also noted a similar effort by 40 major employers, the Health Transformation Alliance, announced in 2016. A year later, HTA issued a statement saying it would experiment with managing drug costs by contracting with Express Scripts and OptumRx, set up regional provider networks (with UnitedHealth and Cigna), and would use IBM’s Watson Health technology to gain health insights (IBM is an HTA member). It’s a big of a puzzle why Amazon and the two other partners are doing their own thing: one of the members of HTA is BNSF Railway, a Berkshire Hathaway company, and Cigna is one of the insurers used by JP Morgan as well as an HTA contractor. But such coopetition is the way of the world when it comes to healthcare in corporate America.
2/5 Update: Jamie Dimon, JP Morgan Chase CEO, appears to have backed off his “potentially, all Americans” comment (above) about who will benefit from the new troika of JP Morgan, Berkshire Hathaway and Amazon. In comments published on Feb. 5 by the Wall St. Journal, Dimon is said to have called various healthcare execs after the Jan. 30 announcement to assure them that the companies are not getting into competition with companies that are or could be JP Morgan Chase clients. And while “industry middlemen” (PBMs, wholesalers and insurance administrators) could be disintermediated by the joint effort, the article says that “the focus now is on helping the current vendors work better, not replacing them.”