CVS, other health stocks down upon Amazon, JPMorgan, Berkshire healthcare co news

Investors panicked this morning upon the news Amazon, JPMorgan Chase and Berkshire Hathaway were teaming up to launch a health insurance company for their U.S. employees.

Healthcare is one of the biggest operating costs for Fortune 500 companies, and the three iconic companies have joined forces to build a new health insurance company for all U.S. employees in an effort to improve satisfaction and reduce those costs.

The new, yet-to-be-named company will “pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company 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,” according to a press release issued this morning.

However, CVS, UnitedHealth and others were down after the news came out, indicating investors’ displeasure at the announcement. CVS dropped by just over 4 percent by midday, UnitedHealth plunged a whopping 11.5 percent, Express Scripts was off by 3.6 percent, Cigna was down by just under 7 percent and Walgreens fell by 2.6 percent.

The plunge isn’t a surprise considering the deal may affect these companies in various ways. Amazon has made indications it would be moving into drug delivery, affecting CVS, Walgreens and Express Scripts’ models.

The announcement also possibly affects health insurance providers like UnitedHealth and Cigna, as well. The three companies collectively employ 880,000 people and the plan is to cover all U.S. employees, though it’s not clear how many of the 880,000 are working internationally versus in the States.

While stock prices dropped immediately, details are still sparse and it still remains to be seen how these three iconic companies plan to shake things up in the industry.

However, it is still a significant announcement for the healthcare industry and will surely have ramifications beyond the activity we see today.

“It puts in sharp relief the fact that large employers will continue to move aggressively forward with or without traditional healthcare players, and the value chain in the near future will likely contain new players and new influencers who will wield significant leverage to force change from status quo,” said digital health market expert and NGP Capital’s John Gardner in an email.