January 31 -- According to foreign media reports, investors were rattled today after Amazon, JPMorgan Chase and Berkshire Hathaway announced that they would join forces to launch a new health insurance company for their U.S. employees.
For Fortune 500 companies, healthcare is one of the largest operating costs. The three iconic companies have joined forces to build a new health insurance company for all of their U.S. employees, aiming to improve employee satisfaction and reduce healthcare costs.
The as-yet-unnamed new company will achieve these goals "through an independent company that is free from profit-making incentives and constraints." According to a press release issued this morning, the new company's initial focus will be on technology solutions that provide simplified, high-quality and transparent healthcare services to U.S. employees and their families at a reasonable cost.
However, after the announcement, the share prices of CVS, the largest U.S. drugstore retailer, healthcare company UnitedHealth Group and a number of other companies fell in response, indicating investor discontent with the announcement.
As of midday, CVS shares were down 4%, UnitedHealth Group shares tumbled 11.5%, Express Scripts shares fell 3.6%, Cigna shares dropped 7%, and Walgreens shares declined 2.6%.
Given that the deal could affect these companies in a variety of ways, the sell-off was not surprising. Amazon has already signaled that it will move into drug distribution, which would disrupt the business models of CVS, Walgreens and Express Scripts.
The announcement could also affect health insurers such as UnitedHealth and Cigna.
Amazon and the other two companies have a combined 880,000 employees, and the new plan will cover all of their U.S. employees, although it is not yet clear how many of the 880,000 work internationally and how many are U.S. employees.
Still, despite the immediate drop in some healthcare stocks, details about the new company remain scarce, and how the three iconic companies plan to restructure the industry remains to be seen.
Nevertheless, this is still a significant announcement for the healthcare industry, and it will certainly have an impact beyond what has been seen today. Some investors believe Amazon will disrupt the healthcare industry just as it did retail.
John Gardner, a digital health market expert at venture capital firm NGP Capital, said in an email: "This news has made it abundantly clear that, with or without traditional healthcare players, large corporate employers will continue to move aggressively forward, and the value chain may soon see new and influential players who will wield significant leverage to force change in the status quo." (Translated by Lutian)
Source: Sina Tech 2018-02-01