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Healthcare stocks are getting smoked after Amazon finally said something about the industry

Graham Rapier
Sad trader

REUTERS/Lucas Jackson

  • Amazon, Berkshire Hathaway, and JPMorgan are teaming up to try to make healthcare more affordable for their US-based employees.
  • Insurance stocks like UnitedHealthcare, Cigna, Anthem and others are deeply in the red early Tuesday after the news hit.
  • Pharmacy stocks and benefits managers were down too. 

Shares of insurance providers, benefits managers, pharmacies, and other healthcare companies are getting smoked in pre-market trading Tuesday after three of the country's largest companies — Amazon, JPMorgan, and Berkshire Hathaway — announced they were teaming up to create a new, independent healthcare company for their employees that will be “free from profit-making incentives and constraints.”

The negative impact the announced collaboration is having on healthcare stocks is just the latest example of the outsized influence both Amazon and Berkshire can have on industries they explore. Armed with mountains of cash and an abundance of resources, their forays into new sectors can erase billions of dollars of market value in a short time.

"The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” Amazon CEO Jeff Bezos said in a press release.

"Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation."

Here’s the scoreboard:

Americans on average spent $714, or 1.6% of their take-home pay on out-of-pocket healthcare costs in 2016, according to a report from JPMorgan Chase. That was up 3.6% from the year before and up 13.5% from 2013. The bank also found that the US spent 18% of gross domestic product on healthcare, up from 13% in 2000.

Aetna’s move also correlates with its earnings report Tuesday morning that beat analyst expectations. MetLife's selloff began Monday afternoon when the company postponed its earnings announcement, originally planned for Tuesday. 

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