Late last year, reports surfaced suggesting that online retail giant Amazon was eyeing entry into the $400bn per year retail pharmacy market.

That still might come to pass, but in the meantime, Amazon is doing something that could prove far more disruptive.

On Tuesday, Amazon and two other corporate giants, Berkshire Hathaway and JPMorgan Chase, announced that they are creating an independent company to provide healthcare for their employees.

A press release issued jointly by the three companies stated that the two primary goals of the venture, which will notably be "free from profit-making incentives and constraints", are to improve employee satisfaction and reduce costs. 

Jamie Dimon, the CEO of JPMorgan Chase, explained, "Our people want transparency, knowledge and control when it comes to managing their healthcare. The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans."

Warren Buffett, Berkshire Hathaway's CEO, was more blunt. "The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, 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," he stated.

Little is known about how the three companies, which combined employ more than 1m people, plan to go about achieving their goals, but according to the New York Times, technology will be at the center of whatever they do. Interestingly, a New York Times source indicated that the new company won't replace existing insurers or hospitals. The New York Times thus speculated:

One potential avenue for the partnership might be an online health care dashboard that connects employees with the closest and best doctor specializing in whatever ailment they select from a drop-down menu. Perhaps the companies would strike deals to offer employee discounts with service providers like medical testing facilities.

What it means for healthcare players

While the success of the company Amazon, Berkshire Hathaway and JPMorgan Chase are launching is certainly not guaranteed, many observers believe that given the size of the three companies, it will have some impact and quite possibly a big impact on the American healthcare market.

That, obviously, means that players in the healthcare market will need to keep a close eye on this venture as it could spell disruption down the road.

Take, for instance, pharma companies. They are often implicated in discussions of healthcare costs and in recent years have come under fire from multiple angles. If Amazon, Berkshire Hathaway and JPMorgan Chase are serious about tackling healthcare costs, whatever they do will almost certainly touch upon prescription drugs. Pharma companies will need to respond strategically.

But while some of the new company's efforts might present challenges to entrenched healthcare players, there are also bound to be opportunities. Many healthcare organizations have been investing heavily in digital transformation and to the extent that the Amazon, Berkshire Hathaway and JPMorgan Chase-led venture leans heavily on technology, it could offer these organizations the ability to take advantage of their investments and influence the direction the new venture takes.

Related reading:

Patricio Robles

Published 1 February, 2018 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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