Last Updated Jan 30, 2018 10:12 AM EST
Amazon's Jeff Bezos and Berkshire Hathaway's Warren Buffett said they are working with JPMorgan Chase to create a new health care company aimed at tackling rising health care costs "free from profit-making incentives and constraints."
The new company pairs the world's richest and third-richest men: Bezos with a fortune pegged at $119 billion and Buffett with a net worth of $92.7 billion. The company is in its early planning stages, but shares of health care companies tumbled in early trading on investor concern about how the venture might shake up the industry.
Buffett has long been critical of rising health care costs, blaming them for hurting American competitiveness. The legendary investor has pointed out that the U.S. spent about 5 percent of GDP on health care in the 1960s, on par with other countries. But the U.S. now spends more than 17 percent of GDP on health care, following years of costs that have outpaced inflation. Other developed countries spend much less, such as Canada, which spends 10 percent of its GDP on health care.
"The ballooning costs of healthcare act as a hungry tapeworm on the American economy," Buffett said in a statement.
The company's first goal will be to create "technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost," they said. The new business would first provide the service to the employees of Amazon, Berkshire Hathaway and JPMorgan Chase, although JPMorgan Chase chairman Jamie Dimon said it would potentially expand to "all Americans."
Drug companies and pharmacy benefits managers -- the middlemen who negotiate drug prices between insurers and drug companies -- should be watchful, said analyst Andrea Harris of Height Securities in a research note.
"High healthc are costs in the U.S. are driven by high prices of services (salaries!) and products (drugs!)," Harris wrote. "Those aren't easy to tackle -- even through technology. However, where Amazon could be particularly effective -- and attractive to employers -- is in reducing waste and unnecessary care."
The company said its management team and location will be announced later.
"Our group does not come to this problem with answers. But we also do not accept it as inevitable," Buffett said in the statement. "Rather, we share the belief that putting our collective resources behind the country's best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes."
The ambitious goal sent a shockwave through the health industry.
Health care stocks fell in early trading. Among them were Express Scripts (ESRX), a pharmacy benefit manager, which fell $7.13 to $74.79, and insurer UnitedHealth Group (UNH), which declined $12.40 to $235.01.