In January 2018, Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), Amazon.com Inc. (AMZN, Financial) and JPMorgan Chase & Co. (JPM, Financial) announced the formation of a new not-for-profit joint venture aimed at disrupting the $3.5 trillion health care industry. Originally nameless, the joint venture was dubbed Haven in March 2019.
Despite debuting with great promise, Haven struggled to live up to the hype. On Jan. 4, the organization announced it will be shut down.
Dream team breaks up
Between Berkshire's unparalleled operational expertise, Amazon's record as a peerless industry disruptor and JPMorgan's status as a financial powerhouse, Haven began life with serious clout behind it. Warren Buffett (Trades, Portfolio), Jeff Bezos and Jamie Dimon were all vocal champions of the venture from the start, demonstrating support at the highest echelons of each partner organization.
As one might reasonably expect from such a credible threat of industry disruption, the share prices of major health care and pharmacy companies initially recoiled at the announcement. But as it turned out, while a dream team on paper, this did not work in practice. According to CNBC, this problem dogged Haven right up to the end:
"One key issue facing Haven was that while the firm came up with ideas, each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter."
Apparently, Haven's backers struggled to collaborate effectively in practice. However, in an email following the shutdown announcement, Haven spokesperson Brooke Thurston sought to paint a slightly brighter picture, both of the organization's work to date and its hopes for the future:
"The Haven team made good progress exploring a wide range of healthcare solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable. Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations."
Disruption not guaranteed
While many observers may be disappointed at Haven's closure after just three years, it is worth noting that the challenge it sought to solve, runaway health care costs, is a massive and growing problem. It was always going to be a profound challenge, even for the likes of Berkshire, Amazon and JPMorgan.
To their credit, Haven's backers were open with the public about the scope of the challenge. Indeed, even while vocally championing and promoting the venture, they advised patience and caution. Even in the January 2018 launch announcement, Bezos did not blanch at hammering this point home:
"The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. 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."
Buffett was also keen to point out that, while the Haven partners might have a better shot than anyone else at transforming health care, it was still a tall order. He said as much in an interview in May 2019:
"It is going to be a long, tough pull to make major changes. It has no guarantee of success at all, but there's nobody I think that's in a better position, in terms of number of employees, ability of the people that are partnering to get along and all kinds of things, to perhaps come up with something to make the system more efficient...We'll try, but nothing will happen quicker, so there is no revolutionary move or anything of the sort. And there will be lots of opposition to any change."
What comes next
In 2019, Buffett characterized Haven's founding as the "first step on what is bound to be a very long journey." At the same time, he pledged to contribute "whatever money it takes" to the venture should it show signs of traction. With Haven now defunct, it remains to be seen whether Berkshire will continue to pursue health care system disruption, either alone or with other partners.
Regardless of Buffett's eventual decision, Amazon, which has been building out health care and pharmacy capabilities independently, is unlikely to slow down in the absence of the joint venture. At the same time, however, it is not clear whether Amazon will attempt anything as sweeping or grandiose as Haven envisioned.
For the time being, it appears that health care incumbents can breathe a sigh of relief.
Disclosure: No positions.
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