The Employer's Guide Blog for Overseeing PBMs

The Definition of Oversee: to watch over and direct (an undertaking, a group of workers, etc.) in order to ensure a satisfactory outcome or performance.

What might the Amazon, Berkshire and JP Morgan health care joint venture actually do?

Amazon, Berkshire and JP Morgan (ABJ) recently announced that they are creating of “an independent company free from profit-making incentives and constraints…to address healthcare for their U.S. employees” generated a lot of publicity. ABJ said that the initial focus of the joint venture will be on “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

Source: Health Transformation Alliance

A report on CNBC indicates that JP Morgan would like the effort to reduce the $1.5 billion they spend on employee health care by 20%. What will ABJ actually do and will they be successful?

Before answering the previous question, it is essential to understand both the nature and magnitude of the health care problems that exist today in the United States. Warren Buffett frames the core problem with US health care system succinctly: “In almost every field of American business, it pays to bring down costs. There’s … no incentive to bring down costs.”

Charlie Munger has described many times how perverse incentives can create a horrific result: “If the incentives are wrong, the behavior will be wrong. I guarantee it. Not by everybody, but by enough of a percentage that you won’t like the system.” “Show me the incentive and I will show you the outcome.” “I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. Never a year passes that I don’t get some surprise that pushes my limit a little farther.”

[Read More]

Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

Leave a Reply