Amazon, Berkshire Hathaway and JPMorgan Chase forming new health care venture

Jan. 30--Amazon is partnering with two Wall Street giants to tackle the herculean task of health care reform.

The online retailer announced Tuesday it's joining forces with Warren Buffett's Berkshire Hathaway and JP Morgan Chase to create an independent health care company that will serve the three firms' employees while remaining "free from profit-making incentives and constraints."

Details were scarce, but the companies said they plan to pair technology with their influence and deep pockets to create a model that reins in costs.

"The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty," Amazon founder and CEO Jeff Bezos said in a statement.

"Hard as it might be, reducing health care'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," Bezos said.

Buffett's company, which owns GEICO, adds insurance expertise to the mix.

"The ballooning costs of health care 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," the billionaire said in a statement.

"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," JPMorgan Chase Chairman and CEO Jamie Dimon said.

The companies admitted their effort is in the "early planning stages." They did not announce a headquarters location.

"They've got the horsepower to become a player," Ed Kaplan, a health benefits expert at the Segal Group in New York, told the Daily News. "This new entity doesn't have the handcuffs of the older players."

Kaplan, who helps negotiate health plans for large employers, said innovations could revolutionize problem areas such as expensive, non-essential trips to hospital ERs and doctor offices.

"Does someone who's successfully managing high blood pressure really need to go four times a year to their provider to get their prescriptions filled? Can't we use technology and test from home on devices that sync to your phone and go to your provider? The technology is out there, but the traditional carriers haven't figure out how to get traction," Kaplan said.

Amazon's retail expertise could also be a game changer for prescription drug pricing, he said.

"Drugs are a big piece of this, and there are some margins there. They could cut out the wholesalers and middle men and still have some profit," Kaplan said.

Amazon has circled the health care field before, but the Tuesday announcement sent shock waves through the sector.

Shares of UnitedHealth, Anthem and major pharmacy benefits managers all took a hit.

Amazon, JPMorgan and Berkshire have more than a million employees worldwide. The announcement relates to U.S. employees only.

"Obviously they have tremendous clout and potential market power, just in terms of the sheer number of their employees and dependents. They might be able to exercise some serious bargaining power," Columbia Business School Professor Frank Lichtenberg, who studies the health care industry, said.

"But what they're planning to do in terms of entering the health care market more generally, it's a big question mark. They provided very few details," he said. "I would expect there to be some learning curve before they have an impact."

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