UnitedHealth Group, the giant health insurance company, on Friday lost its case to prevent a former executive from working at the new health care venture formed by three powerful corporations, Amazon, Berkshire Hathaway and JPMorgan Chase.
A federal judge in Boston denied UnitedHealth’s request to have the executive, David William Smith, immediately stop working. Mr. Smith was an executive at Optum, a unit of UnitedHealth, and it accused him of taking corporate secrets to what it claimed was a competitor. Mr. Smith has denied any wrongdoing.
In its court filings, UnitedHealth argued that Mr. Smith’s role at Optum made him privy to sensitive information about its plans. Among Optum’s businesses is one of the nation’s largest pharmacy benefit managers, which serve as intermediaries between drug makers and employers that purchase medicine for their workers.
The industry has been sharply criticized for a lack of transparency in how pharmacy benefits managers operate, and Optum’s two main rivals recently merged with two large insurers, Aetna and Cigna.
While Judge Mark L. Wolf ruled against it, Optum emphasized that the issues remain unresolved and would need to be settled in arbitration. “We are committed to protecting our confidential information and will aggressively do so in arbitration,” said Matt Stearns, a spokesman for Optum, in an emailed statement.
A spokeswoman for the new venture, referred to as “A.B.C.” or “A.B.J.” in court papers, declined to comment. Unlike court proceedings, the arbitration sessions would not be public.
The case against the nascent venture has highlighted the anxiety of established insurance companies and pharmacy benefit managers over newcomers to their territory. From start-ups to giant technology firms, the new rivals threaten to unseat companies, like UnitedHealth, that have traditionally dominated these markets. Amazon, which has made tentative forays into the pharmacy business, has emerged as a particularly worrisome competitor.
The legal wrangling, which included testimony unsealed by the judge earlier this week, also revealed new details about the powerful triumvirate’s plans. While the companies have said that the new venture was not created to generate profits, they have been cryptic about exactly what changes they could make to lower costs and improve the quality of care for their employees. The company made headlines last summer with its choice of chief executive, Dr. Atul Gawande, a high-profile physician who writes for The New Yorker.
The court proceedings also underscored just how unhappy customers — particularly these three employers — are with the status quo.
“We’ve been asked to solve a very big problem, which is to figure out new ways of health care,” John C. Stoddard, a senior executive for the new venture, testified.
The three employers combined are spending about $4 billion a year on the roughly one million people they cover. But employees “have a poor experience,” Mr. Stoddard said.
“They’re not getting the care they need, and the costs continue to rise,” he said. “We wouldn’t exist unless there was a need to come up with and find a new solution to the problem.”
The venture, which has no name and fewer than 20 employees, plans to tackle several areas, including how benefits are provided through traditional health insurance plans, Mr. Stoddard said. High deductibles, which force employees to pay for significant amounts of their care before their insurance kicks in, are a hardship for “fulfillment-center workers and call-center workers,” he said.
The companies also want to see if they can lower the cost of drugs for chronic conditions. In his testimony, Mr. Stoddard insisted that the new venture had no plans to enter the pharmacy business but wanted to better understand the process and the actual cost of drugs.
“That doesn’t make us a competitor,” he said. “That makes us a very informed customer.”
The employers also want to make it easier for workers to see a doctor, Mr. Stoddard testified. Because Optum also operates a large network of primary-care doctors, the venture might want to work with Optum to provide employees with easier access to physicians.
“That’s why this is so crazy to me: that they think of us as competitors, when I see us as potential partners,” Mr. Stoddard said.
Like other large employers, the companies also want to see if they can make better use of doctor and hospital data and identify where employees can go for better care at lower prices.
The venture plans to conduct a series of experiments to test new approaches for smaller groups of employees with various partners, including Optum, Mr. Stoddard said.
But while Mr. Stoddard would not rule out the possibility that the venture could be a competitor, he emphasized that it had a different purpose. Unlike Optum, which he described as trying to “maximize profits,” the new organization is “trying to create value for families who are trying to use the health care system,” he said.
