Some health-care companies have complained to
Chase & Co. about the bank’s new health-care partnership with
Inc., worried that it could cut into their business.
JPMorgan Chief Executive
got involved personally, speaking with some health-care executives to allay fears that the bank would become their rival, people familiar with the matter said.
The new initiative, which was announced last Tuesday, aims to overhaul health care for the three companies’ legions of employees. It sent shock waves through a number of health-care stocks. Shares of health insurers
all dropped. Other sectors of the health-care industry also felt the sting.
At least two of the industry’s five biggest insurers voiced concern to JPMorgan officials following the announcement, some of the people said.
Mr. Dimon assured clients that the initiative is designed only to serve the employees of the three firms in the partnership. So did some of the firm’s health-care bankers, who get paid handsomely to help clients with mergers and other deals and worry the move could cost them business.
JPMorgan’s health-care bankers only learned of the plan around 9 p.m. the evening before it was announced, according to people familiar with the matter. After the plan became public, some of these bankers fielded calls from clients concerned and confused about the impact.
The bankers reiterated Mr. Dimon’s message to clients. They explained that the initiative is akin to a group-purchasing organization, a type of setup used by hospitals to buy supplies, so the companies can get better deals for their employees, some of these people said.
JPMorgan, the largest U.S. bank by assets, is eager to avoid even a small disruption to its health-care investment-banking franchise, a powerhouse on Wall Street that took in $682 million in revenue in the U.S. last year. Its leading market share of 14% was trailed by that of
Inc. at 10.6% and
at 7%, according to Dealogic.
said feedback from health-care industry has been “overwhelmingly positive.” The bank has “had hundreds of phone calls and emails from client CEOs, doctors and health-care administrators looking to see how they can get involved.” He added: “We see this as an opportunity to work with the industry to tackle the issues facing our country.”
On a Thursday conference call with industry analysts to discuss earnings, Cigna CEO
said such employer moves create “more opportunity versus less for us, because we seek to be an integrated partner from a services standpoint.”
Though details of the project are scant, the idea is for the three companies to launch a not-for-profit company to reduce costs and improve the health-care experience for hundreds of thousands of U.S. employees.
A small team largely including members of JPMorgan’s corporate-strategy group, which delves into big-impact projects across the firm, quietly worked on the plan for several months with Mr. Dimon and counterparts from Amazon and Berkshire, people familiar with the process said.
Marvelle Sullivan Berchtold,
a managing director in the strategy group, is JPMorgan’s point person. She joined the bank in August after stints as global head of mergers and acquisitions for pharmaceutical company
AG and as a senior official at GSK Consumer Healthcare, a division of drugmaker
The bank isn’t getting into business with Amazon, which earlier jolted health-care companies with moves like adding health-care supply options to its business-to-business marketplace. Worries about a potential Amazon entry into the pharmacy-services business were a factor in
Corp.’s $69 billion proposed acquisition of insurance giant Aetna.
JPMorgan bankers were also taking incoming calls from technology companies, including health-care tech firms, intrigued by the initiative’s potential to disrupt the industry, a person familiar with the matter said, adding that there is a possibility for additional business from those firms.
At one stage, there was discussion about whether the venture should take over administration of employees’ pharmacy and health-insurance benefits from the current insurers and pharmacy-benefit managers, according to a document from December reviewed by The Wall Street Journal. But the document was an initial proposal and that idea isn’t currently on the table, people familiar with the matter have said.
The December document also took aim at some of the industry’s middlemen, saying that past efforts to address health costs didn’t work “because they conceded the existence and role of intermediaries like PBMs, insurance administrators, wholesale distributors and pharmacies, which have a vested interest in maintaining the status quo.” One person with knowledge of the matter has said the focus now is on helping the current vendors work better, not on replacing them.
In 2017, JPMorgan spent $1.25 billion on medical benefits for employees based in the U.S., where the medical plan covers almost 300,000 individuals, including employees and their family members, the bank disclosed earlier in January.