After rumors swirled, Amazon (NASDAQ:AMZN) announced earlier this year a new nonprofit to reinvent healthcare with JPMorgan (NYSE:JPM) and Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B). The nonprofit wasn't the only foray into healthcare by the e-commerce giant -- it also acquired a pharmacy company called PillPack for almost $1 billion.
In this segment from Industry Focus: Healthcare, host Shannon Jones and Fool.com contributor Todd Campbell discuss Amazon's plans to disrupt healthcare.
A full transcript follows the video.
This video was recorded on Dec. 12, 2018.
Shannon Jones: Todd, we couldn't close this year out without mentioning Amazon at least once. I think for all of the Industry Focus shows, Amazon comes up as a threat. This year is no different for healthcare. Matter of fact, Warren Buffett famously called our rising healthcare costs "a hungry tapeworm eating out the U.S. economy." And he actually did something about it in 2018, Todd.
Todd Campbell: Yeah. This is a fascinating story. Amazon has been looking around the edges of healthcare for over a year. Then, earlier this year, Amazon surprised everybody by teaming up with Berkshire Hathaway -- Warren Buffett's shop -- and JP Morgan to create a brand-new nonprofit venture with the goal of disrupting healthcare as we know it today. They're very light on details on how they're going to do it. A lot of companies have been trying to change the game in healthcare. But these are three huge employers, over a million employees combined, and they're tackling it head-on. And what makes it really unique is that they've not set this up to be a for-profit venture. They've said, "Everything's on the table. Let's bring in some fresh, best-in-the-business minds and see how we can go about rethinking how we treat people so that it's cheaper and people have better outcomes."
Jones: Yeah. A huge area to watch. I would say, going back to Amazon, this wasn't the only thing they did in 2018. They also bought a small growth company called PillPack, which I think was probably an even larger step for them, and really demonstrating, "We are going after the healthcare space, and we are a threat to be reckoned with."
Campbell: Over $300 billion a year spent on medication. A lot of people have been saying, "What's Amazon going to do? Can they disrupt it? Is CVS in trouble? Is Rite Aid in trouble? What's going to happen with these companies?" What ended up happening is, Amazon went out and bought this really small start-up that has carved out this niche in providing these daily packets of all pills to people who take multiple medications per day. It's highly automated, a very technology-oriented company. It fits very nicely into what Amazon wants to do. How that dovetails in with this future nonprofit, who knows? What that means for CVS and Rite Aid and Walgreens in 2019, we simply don't know yet. But it's certainly a very fascinating move by this company, and one that investors shouldn't ignore.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Shannon Jones has no position in any of the stocks mentioned. Todd Campbell owns shares of Amazon. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Amazon and Berkshire Hathaway (B shares). The Motley Fool recommends CVS. The Motley Fool has a disclosure policy.