Bezos, Buffett, Dimon: Health care’s newest power trio?
This week Amazon (NASDAQ:AMZN), JPMorgan (NYSE:JPM) and Berkshire Hathaway (NYSE:BRKA) announced that they are teaming up to form a healthcare company that intends to increase transparency and cut costs for their employees.
“Health care is being changed by people who are not in health care ... that to me is very significant,” David Friend, managing director of BDO’s Center for Healthcare Excellence & Innovation, told FOX Business.
One of the big influences the three prominent U.S. corporate giants could have in the health care market is pricing leverage. They will theoretically be able to negotiate discounted rates directly with drug makers on behalf of their massive collective network, cutting out middlemen like pharmacy benefit managers.
Ingrid Lindberg, president of Kobie Marketing, said if the three business leaders do use their collective power for this purpose, they’re “not just blowing up the ecosystem of pharma … [they’re] blowing up the health plans.”
Here is the unique role each company could play in the health care collaboration:
Amazon
There have been rampant rumors that Amazon CEO Jeff Bezos was considering entering the health care marketplace, which many believe has the potential to truly disrupt the entire ecosystem.
As Friend pointed out, Bezos has a habit of going after high-margin industries and in the health care sector many have argued that customer service, Amazon’s specialty, could be drastically improved.
Amazon is known for technology, like Amazon Alexa and payment services, along with its rapid delivery resources. While details on the new collaboration currently remain scant, Friend believes the company could ultimate leverage those items to deliver better health care.
“Amazon could disintermediate the [supply chain],” he said. “You could imagine Amazon … they realize before you do that you’re going to run out of your [prescription, call it in for the lowest available price and deliver it to you by drone within 30 minutes.]”
Additionally, Amazon is celebrated for its customer reviews. Friend believes patients may eventually go to Amazon to read about the best type of hip replacement from other users.
The company will add its 500,000 employees to the new health care network.
JPMorgan
JPMorgan’s role in the new collaboration revolves around its credit card services and vast consumer information database, at a time when one of consumers’ biggest expenses is health care.
The big bank can predict consumer trends, often knowing when a credit card user is going to go bankrupt before the individual himself knows, Friend noted.
Beyond that, health care needs to be financed.
“[JPMorgan could be the] banker to a lot of doctors [and] hospitals, in return for better prices [and] services,” Friend said, adding that consumers would also use them to pay off bills.
So JPMorgan could assume the role of “financial intermediary” between consumers and hospitals.
Dimon could also utilize the company’s network to help market services and insurance to all of its credit card members.
Berkshire Hathaway
Berkshire Hathaway chief Warren Buffett has the budget.
“It takes a lot of capital to be in the insurance business … clearly Berkshire has … free cash. Tons of assets [and] capital,” Friend pointed out.
Also, many claims are going to be reinsured, which is another place where Buffett’s business can step in.
Why?
The three companies made a note to say that their new health care initiative would be “free from profit-making incentives and constraints.” While some interpreted that to mean it would operate as a non-profit, Friend believes instead it indicates the company will not primarily be driven by profit-making incentives, and could instead have a consumer-focused mission.
“That’s a big competitive advantage over [United Health] or the other guys who, by corporate set up, have to focus on [maximizing profits],” he said. “I think they can actually create shareholder wealth [and] make it better for their [consumers].”
Not only will the three companies be able to utilize their own services to ultimately make a profit, they will in fact be reducing their own costs.
The downside? Privacy could be compromised as employers will have essentially uninhibited access to your health data, Lindberg pointed out.