Shares of firms in the healthcare industry have been on a bearish trend following the announcement of a joint initiative between Amazon.com, Inc. (NASDAQ:AMZN), JPMorgan Chase & Co. (NYSE:JPM), And Berkshire Hathaway Inc. (NYSE:BRK.A).
The three corporate giants plan to create a new firm that will work towards improving healthcare for employees. The details of the planned independent company are currently scanty and so the operations of the company have not yet been revealed. One thing that analysts are anticipating is that the new firm will hugely disrupt the American healthcare industry.
Berkshire Hathaway, Amazon and JPMorgan Chase have more than 1 million employees globally. The joint venture between the three firms is part of their plan to bring down their spending on healthcare. The collaboration will allow them to negotiate drug prices with hospitals and drug makers so that they can secure the best healthcare deals for their employees. This move might eliminate middlemen and eventually cause drastic changes to the entire healthcare industry in the U.S.
So why the announcement about the formation of the new company by Amazon, JPMorgan Chase, and Berkshire Hathaway cause healthcare stocks to take a dive? Well, this has to with the fact that there is a lot of investor concern. Investors are worried that the newly announced plans could significantly disrupt the current status of healthcare companies especially considering the influential nature of Amazon and the other two firms in the partnership.
The Health Care Select Sector SPDR experienced a 1.8 percent decline following the announcement while the SPDR S&P Biotech ETF experienced a 1.5 percent decline. The formation of the new company to tackle healthcare is a huge step forward, especially for employees. It will work towards solving one of the biggest problems that employees face and that is the high cost of healthcare.
Healthcare has also been a problematic topic for Congress and thus most of the issues in healthcare have been pushed towards the private industry.
The U.S. health-care system is unsustainable in terms of its costs, and the entire debate by political leaders -whether it is Democrats or Republicans- has focused on repairing and replacing Obamacare and the ideological differences,” stated John Sculley, the chief marketing officer at health tech firm, RxAdvance.
Amazon stock closed the latest trading session on Tuesday at $ 1,437.82.