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Amazon makes first steps into healthcare, alongside big partners

Published on 31/01/18 at 09:41am
IMAGE: Silus Grok - Flickr

Amazon’s move into the healthcare sector has been widely mooted over the last 12 months and it officially announced that it would enter the space as part of a joint venture alongside Berkshire Hathaway and JPMorgan Chase.

The joint announcement from the three companies offered precious few details as to what the partnership would entail, only that it would provide technology solutions for “simplified, high-quality and transparent healthcare at a reasonable cost”.

The three companies employ approximately a million US citizens and the indication is that they will aim to cover healthcare for their employees first, before potentially expanding the project.

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

The last part is more than likely what spooked the shares in major health insurers and pharmacy benefit managers (PBMs), with CVS down 4.1%, United Health Group by 4.3% and Express Scripts 3.1%.

As part of the announcement, it was revealed that an independent company will be created “that is free from profit-making incentives and constraints” – a not-so-subtle swipe at PBMs, which have come under increased criticism over the last few years for increasing costs.

“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,” said Berkshire Hathaway Chairman and CEO, Warren Buffett.

Amazon has been working on a way to penetrate the healthcare market for a considerable time but the fiendishly complicated nature of the system has led to them taking on some of the risk alongside two big partners.

Jeff Bezos has previous experience of trying to break into the space; by buying into drugstore.com, Bezos believed he could change the marketplace. However, he was eventually forced to concede defeat by selling the company to Walgreens in 2011 but now feels the time is right to head back into the area.

“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

With three companies that employ a vast number of people clearly growing fed up with the current system, this looks like it could be a watershed movement in the drive to bring down healthcare costs – if only because it acts as a major red flag to companies already existing in the space that such behemoths are not going to accept the current system as it stands.

Ben Hargreaves

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