Market Comment: New disruptor in health care?

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Amazon, JPMorgan and Berkshire Hathaway on Tuesday announced plans to set up a partnership to address health care needs for their collective employees. Piet Schimmel, equity thematic expert at ABN AMRO, believes that the real impact of initiatives like the Amazon-JPMorgan-Berkshire venture lies in their potential to disrupt the traditional health care system in the longer term.

Piet, what do we know about this joint health care initiative?

In a nutshell: Amazon, JPMorgan and Berkshire Hathaway are joining forces to set up an independent non-profit company through which they aim to organize health care services for their 1.2 million US employees. The goal of this initiative is to offer health care in a simpler, more transparent way and to reduce the high costs involved.

What is the impact of this initiative?

When looking at the initial market impact: drug stores stocks declined in response to the announcement. As to the initiative itself: it will be interesting to see how this pans out. By combining Amazon’s IT and supply chain knowledge, Berkshire Hathaway’s insurance know-how and JPMorgan’s financial expertise, this partnership has the potential to disrupt and improve the very expensive US health care system. The real impact of the Amazon-Berkshire-JPMorgan venture – if successful – will be more of a long-term story: the health care system is very complex and regulated with many parties involved, sometimes with conflicting interests. After the supermarkets, the drug distribution sector seems to be the next victim of a broader trend where big online platforms are profiting from disrupting traditional business models.

Where do you see opportunities for investors?

We continue to see investment opportunities in the big online platforms, because of their disruptive potential. With regard to health care: we have a neutral view on the sector, but we like companies with a strong pipeline of new medicines. Due to their patents, these new medicines are better protected against competition from generic drug makers. Furthermore, biotech funds with exposure to small-cap biotech stocks can be considered, as many big pharma companies are starting to look at take-over targets again.