America's 10 largest publicly traded health insurance and pharmacy stocks saw a whopping $30 billion erased from their collective market capitalization within two hours following news that some of the tech and finance worlds' most powerful leaders are planning to join together to take on the broken health care space. On Tuesday, Amazon.com Inc. (AMZN), Berkshire Hathaway (BRK.A) and JPMorgan Chase & Co. (JPM) announced a vague initiative to launch an independent company that is set to offer health care services to the companies' 1.1 million employees at a lower cost.
The venture, which will be run more like a nonprofit than a for-profit entity, will be managed by the firms' leaders Jeff Bezos, Warren Buffet and Jamie Dimon. (See also: How Jeff Bezos Got to Be the World's Richest Man.)
The Amazon Effect Will See You Now
The drop off in health care stocks isn't the first caused by Amazon fears. The e-commerce and cloud computing giant has gnawed away at shares of traditional market leaders across disrupted industries such as books, food, furniture, cloud-based storage services and more. Yet in response to the sell-off in health insurance stocks, one team of analysts on the Street suggests that this time might be different.
In a note entitled "Amazon/Berkshire/JPM Joining Forces; More Bark than Bite at this Point," Cantor Fitzgerald analyst Steven Halper wrote that while investors shouldn't "discount the clout that these entities potentially bring to the table, it is entirely too early to cede victory to the yet unnamed venture." Expressing doubt that the executives put in charge of the new organization possess adequate industry experience to navigate an extremely complex health care space, Harper suggested that his firm does "not believe this represents a new competitive threat to managed care companies at this juncture."