Among the many predictions regarding Amazon’s next move, health care has been among the top options, particularly since the company gained approval to become a wholesale pharmaceutical distributor in 12 U.S. states. The e-Commerce giant has finally made the leap in a massive way, partnering with Berkshire Hathaway and JPMorgan Chase to create an independent health care company for the three companies’ U.S. employees.
The new, unnamed company seeks to improve employee satisfaction and reduce costs in an environment “free from profit-making incentives and constraints,” according to a company statement.
Amazon’s ability to gather customer data and integrate it into services such as Alexa could be a key component in connecting consumers with the right health plans and delivering relevant price points for drugs and health services. The move, announced Jan. 30, puts additional pressure on major pharmacies such as CVS and Walgreens as well as Pharmacy Benefit Managers (PBMs) to improve their relationships with drug manufacturers, further reduce prescription costs, provide better health plans and enhance the customer buying experience.
While the combination of resources and sheer capital from Amazon, Berkshire Hathaway and JPMorgan Chase gives the combined entity a fighting chance to disrupt the industry, competing pharmacies shouldn’t necessary feel threatened just yet.
“Considering the regulatory burden around every aspect of health care, any new entrant in the space is at a huge disadvantage, and companies like CVS, Walgreens, United Healthcare, Aetna and Express Scripts already have large scale, which allows for better vendor and drug manufacturer contracting and the ability to serve national clients,” said Mickey Chadha, VP of Moody’s Investors Service in commentary provided to Retail TouchPoints. “In light of today’s announcement, the potential merger of CVS and Aetna is even more compelling, as a more coordinated approach to medical care is necessary to lower the overall health care costs for consumers.”
Together, Amazon, Berkshire Hathaway and JPMorgan Chase employ more than 1.1 million workers.
The effort is still in its early planning stages, with the initial formation of the company jointly spearheaded by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a Managing Director of JPMorgan Chase; and Beth Galetti, a Senior VP at Amazon.
Amazon has not revealed the new company’s long-term management team, headquarters location or any additional operational details, but plans to reveal more information at a later date.