What Walmart Buying Humana Could Mean

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Walmart pickup

Bentonville, AR — Walmart is reportedly in talks to acquire Humana.

According to a story first reported in the Wall Street Journal, Walmart is holding preliminary talks to buy U.S. health insurer Humana Inc. and the companies are discussing various options.

Walmart Inc.’s potential acquisition of a health insurer would enable it to move away from the competitive pressures of retailing. It would also thrust it into the rapidly evolving health-care sector.

As reported by CNBC, the health insurer’s stock rose 7% this morning, the first day since the two companies were said to have discussed the acquisition.  By comparison, Walmart’s stock plunged by 4%.

But details of the deal remain vague and it’s possible the acquisition may never happen.

“Under its current alliance with Walmart (which began in 2005), Humana stations representatives in Wal-Mart stores, Sam’s Club locations and Neighborhood Markets across the country who seek to enroll Medicare-eligible individuals,” said Credit Suisse analyst A.J. Rice. “By way of background, Humana operates its own pharmacy benefit manager that services its own health plan offerings. The PBM also has a state of the art mail order facility that has a strong specialty capability.”

Like other recent health care pairings, the deal, if it happens, could mark a pursuit of big data across industries.

CVS Health announced a $69 billion deal to buy insurer Aetna in December. That would combine CVS’ pharmacies and pharmacy benefit manager (PBM) platform with Aetna’s insurance business.

Amazon, J.P. Morgan Chase and Berkshire Hathaway also have teamed up to tackle rising employee health-care costs. CNBC also has reported that Amazon has participated in exploratory talks with generic drugmakers.

And in February, WholeFoods Magazine reported that grocery chain Albertsons was expanding its retail pharmacy divisions by purchasing more than 2,500 Rite Aid stores.

According to a report in MarketWatch, customer data, a longtime preoccupation of retailers, is increasingly seen by health care executives as central to containing rising health care costs.

Combined, this type of big data could be used to better sell Walmart’s retail products and services and manage the financial risks of Humana’s health plans.

Having both retail and health businesses under one umbrella could also help push wellness initiatives for customers and health plan members, such as incentivizing healthier food choices, something Humana and Walmart have already worked together on.

“As the country’s largest retailer and the biggest seller of food, Walmart is in a unique position to help consumers lead healthier lives and make informed decisions about things like diet,” said Neil Saunders, managing director of GlobalData Retail. As the potential owner of a health insurance firm, it would also be in a position to reward customers for making healthy choices.”

 

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