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Optum sues to stop ex-executive from taking secrets to Amazon-Berkshire-JPMorgan venture

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UnitedHealth Group-owned Optum has sued to block a former executive from working at Amazon, Berkshire Hathaway and JPMorgan Chase’s new healthcare cost-saving venture and potentially sharing trade secrets, in a sign of industry anxiety about the project’s disruptive potential.

Last week, Optum filed a non-compete and trade secrets lawsuit in U.S. District Court in Massachusetts against David Smith, who started working this month as the yet-unnamed joint venture’s director of strategy and research.

Optum claims that Smith, who worked as vice president of product, was privy to and misappropriated trade secrets that will help the new venture compete against it, violating non-disclosure and non-compete covenants in his contract. It asked for an injunction barring Smith from working for Amazon-Berkshire-JPMorgan and using its trade secrets.

The lawsuit suggests the healthcare services giant is nervous about the potential impact of the new joint venture on its businesses in data analytics, pharmacy services, medical clinics, population health management and advisory services.

In his motion to oppose a temporary restraining order, Smith argued he has no Optum trade secrets in his possession, has no use for such information in his new job, and that Optum’s own arbitration agreement with him precludes it from bringing the lawsuit.

Beyond that, he said Amazon-Berkshire-JPMorgan does not compete for business with Optum in that it offers no products or services to the general market and is not profit-seeking.

A spokesman for UnitedHealth Group insisted that Smith “violated his employment agreement and stole confidential company property on his way to go to work for a competitor.” He added that his company “has spent decades developing custom products and services” and is “committed to protecting the hard work of our colleagues.”

Last January, the CEOs of Amazon, Berkshire Hathaway, and JPMorgan Chase announced they were forming an independent, not-for-profit entity to reduce healthcare costs and improve care for their nearly 1.2 million employees. In June, the companies hired prominent Boston surgeon and health policy writer Dr. Atul Gawande as CEO, and said their joint venture would develop models that could be used by other employers.

Despite the lack of specifics, the endeavor has been touted by some observers as a potential disruptive force that will drive widespread change throughout the industry.

Optum’s complaint warned that obtaining its trade secrets could enable a competitor to anticipate its acquisition targets, more quickly develop competing, lower-cost products and services, lure away customers and business partners, and negotiate better deals with pharmaceutical manufacturers.

It noted that two of the three partnering companies, Berkshire Hathaway and JPMorgan Chase, are currently Optum customers, so their joint venture will be a direct competitor.

In a Dec. 21, 2018 letter to the three companies, UnitedHealth Group’s chief legal officer, Marianne Short, said her company understands Amazon-Berkshire-JPMorgan’s venture will compete directly with Optum and UnitedHealth based on media reports that it seeks to manage prescription benefits, open primary care clinics and market software that mines data from patient medical records.

But the three companies have not announced any details of how they will implement the mandate, or what the venture’s name even is. So no one really knows whether it will be competing against Optum.

The company “is pre-product and pre-launch,” said Dr. Bob Kocher, a partner at venture capital firm Venrock an Obama administration health policy adviser. “Few startups ever surpass $10 million in revenue, a far cry from the $100 billion (Optum) generates every year. It is highly unlikely that David Smith, no matter how good he may be, could be the difference in making (the company) a threat to Optum.”

In his response to the complaint, Smith said the joint venture is seeking to test and disseminate solutions provided by third-party vendors, which potentially could include Optum. He said he and his new employer have signed an agreement that he will recuse himself from any analysis of Optum or UnitedHealth Group products or services.

In addition, he said the firm had him sign an agreement that he will not disclose or use any confidential information belonging to any previous employer.

Amazon, Berkshire Hathaway and JPMorgan Chase did not respond to requests for comment.

Source: ModernHealthCare.com