Amazon, Chase, and Berkshire Hathaway partner up to fight health care costs
Amazon has joined forces with Warren Buffett's Berkshire Hathaway and JPMorgan Chase in a bid to slash health care costs for their 1.1 million employees.
Together, the three partners will combine resources to create an independent company that will initially focus on "technology solutions" to provide "high quality and transparent health care at a reasonable cost."
The news had an immediate impact on the market, with shares in CVS and UnitedHealth dropping 7 percent in premarket trading. Pharmacy benefit manager Express Scripts fell nearly 5 percent and Aetna was down nearly 4 percent, CNBC reported.
"The ballooning costs of health care act as a hungry tapeworm on the American economy," said Buffett in a joint statement announcing the partnership. "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."
"Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans," said Jamie Dimon, Chairman and CEO of JPMorgan Chase.
The soaring price of healthcare has drawn a new light on an interconnected machine of players that comprise the U.S. healthcare system. Before a drug reaches a patient, it effectively passes through the control of the drug maker, an insurer, a PBM, a wholesale distributor, and a pharmacist, with each taking a cut along the way. Most patients never see the real cost of a drug and have grown accustomed to paying a nominal $30 or so co-pay for many prescriptions.
But as health plans have rejiggered to control costs, more patients have gotten exposed to paying full "list price" at the pharmacy counter, which can run into the hundreds of dollars. That has patients, parents, and politicians up in arms. After the emergency anti-allergic reaction drug EpiPen raised its list prices to $600, as reported by NBC News, angry families stormed social media and contacted their representatives. The drugmaker, Mylan, ended up answering questions on Capitol Hill and was fined by the DOJ for overcharging Medicare.
During that controversy the company's CEO drew a new bead on one of the cogs in the healthcare system, the pharmacy benefits manager, suggesting they were to blame for most of the markup. PBMs negotiate prices between insurers and drugmakers and apply cost-saving techniques to the "formulary" of approved drugs.
Insurers and PBMs are frequently involved in contentious lawsuits with one another over pricing and profit, all adding to the pressure for new ways to reduce the cost of healthcare.
"Hard as it might be, reducing health care's burden on the economy while improving outcomes for employees and their families would be worth the effort," said Amazon founder and CEO Jeff Bezos.