Berkshire Hathaway 2018 Annual Meeting Audience Question # 24

The goal of Berkshire’s health care partnership with Amazon and JP Morgan is to improve care

Warren Buffett:

OK, station eight?

Audience Member:

Austin Merriam, from Jacksonville, Florida.

Mr. Buffett, with the recent news of the partnership between you, Mr. Bezos, and Mr. Dimon, to challenge the health care industry and the self-admitted difficulties you are running across, this would lead me to believe the industry has higher barriers to entry than may have originally been hypothesized; a larger moat, if you will.

Would that justify a higher earnings multiple for established players in the industries, such as PBMs, for example?

Warren Buffett:

Well, just… though the system may have a moat against intruders, it doesn’t mean that everybody operating within the system has individual moats, for one thing.

Now, I… we are… if this new triumvirate succeeds at all, we are attacking an industry moat. And I’m defining industry very broadly; health care, not just, you know, health care insurers or this or that.

We’re trying to figure out a better way of doing it and making sure that we’re not sacrificing care. And the goal is to improve care.

And like I say, that is a… that’s a lot bigger than a single company’s moat. It’s bigger than a component of the industry’s moat. The moat held by the whole system, since it interacts in so many ways, is actually… that’s the moat that essentially has to be attacked, and that’s a huge moat.

And like I say, we’ll do our best. But… I hope if we fail, I hope somebody else succeeds.

Charlie?

Charlie Munger:

Well, I suspect that eventually when the Democrats control both houses of Congress and the White House, we will get single-payer medicine. And I don’t think it’s going to be very friendly to many of the current PBMs.

And I won’t miss them.

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