A vaguely worded press release from three prominent US companies was all that was needed to shed $74 billion from the health care sector on Tuesday.
Tech giant Amazon joined with Warren Buffett’s Berkshire Hathaway and JPMorgan Chase to form an independent company that aims to provide “simplified, high-quality and transparent health care at a reasonable cost” for their approximately 1 million US employees, the three said.
Details of the new endeavor were scant. Executives at the companies admitted to being in the “early planning stages.”
But investors, sensing the new nonprofit would be a disrupter and that prices charged by pharmacy benefit managers, drug makers and health insurers would come under pressure, sent shares of companies in those sectors down sharply.
“The reality is today’s news simply confirms what we already expected: [Amazon] intends to do something and to be disruptive,” Eric Coldwell, an analyst at Baird, said in a note.
That disruption was palpable in the trading session. Health care companies in the S&P 500 collectively gave up $74 billion, representing more than a quarter of the index’s losses.
“This is an unprecedented and fluid situation,” Coldwell said, adding he expects stocks to rebound in coming weeks and months.
UnitedHealth was the biggest laggard Tuesday, falling 4.4 percent, to $236.65. Shares of pharmacy benefit manager Express Scripts shed 3.2 percent, while shares of CVS Health and Aetna, which are planning to merge, were also down 4.1 percent and 3 percent, respectively.
Aetna tried to stay positive amid the selloff. “There is an unmet consumer need in health care,” the company said.