NEW YORK (Reuters) - Amazon.com Inc AMZN.O, Berkshire Hathaway Inc BRKa.N and JPMorgan Chase & Co JPM.N said on Tuesday they will form a company to cut health costs for hundreds of thousands of their employees, setting up a major challenge to an inefficient U.S. healthcare system.

The move by three of the best-known U.S. business leaders - Amazon’s Jeff Bezos, Berkshire’s Warren Buffett and JPMorgan’s Jamie Dimon - would take on the world’s most expensive healthcare system, whose mounting costs have hurt corporate profit. Shares of U.S. healthcare companies fell across the board.

The new, not-for-profit venture will initially focus on technology for “simplified, high-quality and transparent healthcare” for their more than 500,000 U.S. employees, the companies said. They did not elaborate on their strategy, but said they are searching for a chief executive officer.

Healthcare industry experts say the new entity could eventually negotiate directly with drugmakers, doctors and hospitals and use their vast databases to get a better handle on the costs of those services.

That could undercut the industry’s “middlemen,” from health insurers to pharmacies and benefits managers.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway Chairman and CEO Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

U.S. healthcare spending has been increasing annually faster than inflation, and in 2017 accounted for 18 percent of the economy. Corporations sponsor health benefits for more than 160 million Americans.

“There are a lot of companies, or arguably almost all companies, in healthcare that benefit from cost inflation running as high as it has been for many years,” ISI Evercore analyst Michael Newshal said. “And if there is pressure to lower that, that can flow throughout the entire system.”

STARTING THE CONVERSATION

The new initiative grew out of conversations that Bezos, Buffett and Dimon have held over the years and gained momentum in recent months, according to a person involved with the consortium but who was not authorized to speak publicly.

The three CEOs plan for their companies to be the only clients of the joint venture, the person said. However, they intend to share the strategies and technology they ultimately develop to reduce costs for the economy and the government.

Traditional healthcare players have tried to reduce costs without losing their profit margins. Most recently, pharmacy network CVS Health Corp CVS.N reached a $69 billion deal to buy insurer Aetna Inc AET.N, arguing their combination could save money for the nation's employers.

Investors in the sector expect Amazon will become a major disruptor of healthcare, just as it has done in the retail industry, fueled by media reports in recent months that the company was considering entering the pharmacy business.

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Teaming up with JPMorgan, the biggest U.S. bank, and Berkshire, the third-largest public company globally and an insurance provider, offers new opportunities to shake up the industry, analysts said.

For example, JPMorgan could help shape new payment models for consumers and providers, and provide cost data. CEO Dimon has for years expressed concerns about rising healthcare costs.

The bank has said it spent $1.25 billion on U.S. medical benefits last year, 2 percent of companywide expenses.

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Buffett has long complained that high healthcare costs were hurting American businesses, and publicly began using the term “tapeworm” to describe their effects as early as 2010.

In September 2016, an investment officer for Buffett, Todd Combs, joined JPMorgan’s board of directors, and began seeing Dimon regularly. Combs will help lead the new entity, along with JPMorgan managing director Marvelle Berchtold and Amazon Senior Vice President Beth Galetti, the companies said.

INSURERS FALL

Health insurers that provide benefit management or health plans to Amazon, JPMorgan and Berkshire could be among the hardest hit.

JPMorgan uses UnitedHealth Group Inc UNH.N and Cigna Corp CI.N for health benefits for its global workforce, according to ISI Evercore analyst Ross Muken. Neither company was available for comment.

Amazon uses Premera Blue Cross, part of the Blue Cross Blue Shield network, according to Muken. Express Scripts ESRX.O, the pharmacy benefits manager, has disclosed it manages pharmacy benefits for Amazon.

Shares of UnitedHealth Group Inc UNH.N, Cigna Corp and health insurer Anthem Inc ANTM.N were 4 percent to 7.2 percent lower at the close. Drugstore operators CVS and Walgreen Boots Alliance WBA.O, as well as Express Scripts, closed between 3 percent and 5.2 percent lower. Drug distributors Cardinal Health CAH.N, AmerisourceBergen Corp ABC.N and McKesson Corp MCK.N were off 1 percent to 3 percent. Amazon closed up 1.4 percent.