United States: The New World Order In US Healthcare: Amazon, Berkshire Hathaway And JPMorgan Chase

On 30 January 2018, three major companies representing over 1.2 million employees announced their plans to form a nonprofit company to embark on an ambitious venture to take back control over their employees' healthcare costs and wellbeing as Sheryl Tatar Dacso, Partner at Seyfarth Shaw LLP and member of the Digital Health Legal Editorial Board, explains. The three companies - Amazon, Berkshire Hathaway and JP Morgan Chase - bring much more to this venture than just their employees. What they bring to the market is a new and disruptive approach to the delivery of and payment for healthcare services and products, leveraging the technology and innovation of Amazon, the capital management skills of Berkshire Hathaway and the financial prowess of JPMorgan Chase.

Although the details of the venture are not yet published, those who follow these companies and this venture report the following:

  1. This is not another employer purchasing cooperative. The parties are approaching this with a 'fresh palette' of technology solutions that will provide their US employees and families with simplified, high quality and transparent healthcare at a reasonable cost.
  2. The organisation to be formed among the three companies is intended to be a not for profit company with a representative of each of the three companies appointed to lead its organisation. According to a report by Milliman1, the new legal entity is intended to be a vehicle for deploying a different and disruptive approach to healthcare that leverages technology with business and financial acumen to change how healthcare is funded and delivered. Each company is selfinsured and collectively they spend over $15 billion (US) on employee healthcare costs2. The report cites several key areas that will likely play to the venture's strengths:

    1. Experience with internet based platforms for creating access and gathering information on users that can take advantage of the healthcare system's current use of electronic health records and other information;
    2. Successful use of an online marketplace that can be transformed for the healthcare industry to create a more transparent cost structure by leveraging cutting edge technology to update provider fees in 'real time' to enable patients to compare cost/value across providers/suppliers to inform their choices;
    3. Better management of pharmacy costs through value based contracting solutions that allow pharmacy manufacturers to achieve a longer term profit stream in return for improved pricing while a drug is under patent;
    4. Use of data management and predictive analytics to improve patient behaviour (e.g. medication adherence, personalised medicine opportunities and better monitoring of outcomes) all of which help control costs;
    5. Managing the supply chain process in return for better pricing terms and holding manufacturers accountable for clinical outcomes; and
    6. Changing the reliance by providers and payors from a claims based process of payment to one relying on the electronic medical record which can be directly accessed by provider, payors and the patient.

Immediately following the announcement of the proposed alliance there was a drop in stock prices for certain major health insurers and pharmaceutical companies3. There may be regulatory issues affecting the structure and operations of the new company as it engages in competitive contracting for pharmaceutical products, durable medical equipment and provider services. Amazon was already evaluating becoming a retail pharmacy.

In one sense, the new company will function as a group purchasing organization ('GPO'). Some GPOs take title and resell products, while others negotiate terms under which members purchase directly from vendors. Other GPOs manufacture all or part of the products that members buy through the group, although it is more common for GPOs to outsource from independent suppliers, to exert significant pressure and purchasing power which may implicate federal antitrust regulations.

Although most GPOs are considered pro-competitive since they offer an efficient way to reduce transaction costs and prices for their members, the consolidation of too much purchasing power in one organisation can create monopsony or oligopsony power that can force prices below a competitive level4. Because the three companies are selffunded employers under the Employee Retirement Income Security Act of 1974 ('ERISA'), whose health plans are not subject to state insurance regulations, and because the 'business of insurance' is generally not subject to antitrust regulation, the application of antitrust laws to the new venture is unlikely. However, there are other regulations that apply, specifically ERISA, which affect self-funded plans5. It is unclear (and unlikely) that the companies will form a multi-employer welfare organization ('MEWA') sharing a common benefit plan, and more likely that each company will rely on the new company to manage its contracts and procurement processes to engage the goods and services required by its own employees under the terms of its own benefit plans6.

It is speculated by some that success with managing their own employees' healthcare costs may create an opportunity for expansion of the new company's services to other self-funded employers. This is what happened with the development of the Kaiser Health Plan, which evolved from Henry Kaiser's post World War II initiative to insure his own shipyard employees to a major healthcare system that offered insurance products and benefits through its own program to other employers, primarily on the West Coast7.

The arrangement must be structured to satisfy federal and state privacy laws8. We can expect these companies and the new business to pay close attention to compliance with the myriad of laws, rules and regulations that already apply to the aggregation and storage, transmission and use of electronic health information. Patient engagement is a key component of the proposed program and will likely result in the expansion of on-site or remote access healthcare services via telemedicine and other digital health technology such as 'wearables' for the employees of the three companies. A similar effort by 40 major employers associated with the Health Transformation Alliance ('HTA') was announced in 2016 to focus on managing drug costs by contracting with the large pharmacy benefit companies (Express Scripts and OptumRx), provider networks associated with United Healthcare and Cigna using Watson Health Technologies (IBM) to manage the data and analytics9. It is unclear how the new nonprofit venture proposed by the three large companies will affect (or be affected by) the HTA initiative as there is overlap with members of the new venture and the HTA organisation and its contractors. However, these can probably be reconciled based on the use of a separate legal entity by the new venture and a different strategy for its purpose. It remains to be seen how the three companies will utilise the new company but it may be able to offer a menu of options to each of the three employers.

However, it is unlikely that changes would be made to each company's existing contracts for now. It is worth noting that the desire to control escalating costs in healthcare has also expanded to other initiatives. For example, it was recently announced that groups representing more than 450 hospitals (including the US Veterans Administration) plan to form their own generic drug company10. The new company is looking to create generic versions of about 20 existing drugs that the hospitals say cost too much now or are in short supply. The new company expects the first of its pharmaceutical products to become available in 2019. In another approach, Apple has opened medical clinics for its employees11. Taking control of the greatest costs to healthcare - pharma, insurers/administrators and access to providers, sprinkled with a bit of wellness programming, appears to be a common strategy by the larger employers who seek to better manage and control their healthcare spending. It will be interesting to see how these different approaches ultimately affect healthcare costs.

Footnotes

1 http://www.milliman.com/Five-ways-the-Amazon-Berkshire-Hathaway-JPMorgan-Chase-deal-could-change-healthcare-in-the-US/

2 It is estimated by Willis Towers Watson that the combined healthcare costs are more than $15 billion for the three companies.

3 See https://www.nasdaq.com/article/what-tomake-of-the-amazon-berkshire-hathaway-andjp-morgan-healthcare-company-cm913986

4 See generally Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.,Inc., 549 U.S. 312, 320-21 (2007) ("A predatory bidder ultimately aims to exercise the monopsony power gained from bidding up input prices. To that end, once the predatory bidder has caused competing buyers to exit the market for purchasing inputs, it will seek to 'restrict its input purchases below the competitive level,'" thus "reduc[ing] the unit price for the remaining input[s] it purchases." (quoting Steven Salop, Anticompetitive Overbuying by Power Buyers, 72 ANTITRUST L.J. 669, 672 (2005)); ASSOCIATIONS HANDBOOK, supra note 10, at 166-67 (discussing 'buyer power' issues).

5 https://www.dol.gov/general/topic/retirement/erisa

6 Although ERISA does not prohibit MEWAs, most states prohibit its use for employee benefit arrangements among multiple employers. See discussion of plans maintained pursuant to collective bargaining agreements -MEWAs Multiple Employer Welfare Arrangements under the Employee Retirement Income Security Act ('ERISA'): A Guide to Federal and State Regulation, FR Doc. 2013-04863, www.dol.gov/ebsa/pdf/mwguide.pdf, p. 24.

7 See https://en.wikipedia.org/wiki/Kaiser_Permanente

8 See https://www.hhs.gov/hipaa/for-professionals/privacy/index.html (US) and https://en.wikipedia.org/wiki/General_Data_Protection_Regulation (EU)

9 http://pharmaceuticalcommerce.com/business-and-finance/amazon-berkshire-hathaway-jp-morgan-chase-will-partner-employee-healthcare/

10 http://www.businessinsider.com/nonprofit-generic-drug-company-formed-by-hospitals-2018-1

11 https://www.benefitspro.com/2018/03/01/apple-launching-concierge-health-care-centers-for/?slreturn=20180201172518

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions