Amazon moves into healthcare

AAP

31st Jan 2018

Amazon.com, Berkshire Hathaway and JPMorgan Chase & Co are forming a venture aimed at lowering healthcare costs for their US employees, sparking a slide in the shares of a host of healthcare-related companies.

The three companies on Tuesday said they will create an independent firm “free from profit-making incentives and constraints” that will initially focus on technology solutions to provide employees and their families with healthcare “at a reasonable cost”.

Drugstore operators CVS Health Corp and Walgreen Boots Alliance as well as pharmacy benefits manager Express Scripts Holding Co dropped between 4.5 per cent to six per cent in pre-market trading.

Drug distributors Cardinal Health, AmerisourceBergen and McKesson were all down nearly three per cent. Health insurers also fell, with UnitedHealth’s 6.2 per cent drop the steepest.

The move comes amid growing speculation that Amazon is likely to enter the prescription drug business and that has sent tremors through the pharmaceutical supply chain.

The plan, currently in early stages, will be spearheaded by Berkshire investment officer Todd Combs, JPMorgan managing director Marvelle Berchtold and Amazon senior vice president Beth Galetti.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway Chairman and chief executive, Warren Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”