Private Payers News

Rumors Swirl of Possible Walmart Acquisition of Humana

Walmart may be looking to acquire Humana, bringing another new mega-merger entity into a rapidly changing payer, provider, and pharmacy benefit manager landscape.

Walmart Humana acquisition

Source: Xtelligent Media

By Jennifer Bresnick

- Walmart may be making a move to acquire Humana, one of the nation’s biggest health payers, according to The Wall Street Journal.

Citing sources familiar with the matter – but without comment from Humana or Walmart – the Journal reported that “preliminary talks” are underway to bring the two entities together through some form of enhanced partnership, merger or total acquisition.

The speculation is eminently plausible given the buzz created by CVS Health’s recent $69 billion purchase of Aetna, as well as the $67 billion buyout of Express Scripts by Cigna.

The two prior deals were driven by the need to consolidate data assets and scale up in market share in order to personalize patient care while controlling runaway pharmaceutical spending.

In addition to pharmacy benefit management gains, Walmart has some added incentives, mainly around competing with CVS Health in the retail clinic and retail pharmacy segments by bringing a major insurer under its wing. 

Similar to CVS MinuteClinics, Walmart Care Clinics provide basic primary care, laboratory, and wellness services co-located with a pharmacy and easy access to over-the-counter remedies in a place most customers visit regularly for a variety of needs.

Like most other retail clinics, Walmart Care Clinics are staffed by nurse practitioners who can write prescriptions and diagnose most common concerns.

The ability to steer more patients to Walmart pharmacies through the network of on-site retail clinics is an attractive proposition – even more so since CVS Health and Aetna will likely employ similar strategies to keep individuals in their network.

Humana is a good fit for helping Walmart capture an important segment of the consumer healthcare world.

Humana holds a significant proportion of the Medicare Advantage market, according to the Kaiser Family Foundation.  Together with UnitedHealthcare, the two companies accounted for 41 percent of Medicare Advantage enrollment in 2017.

Medicare Advantage is one of the fastest growing components of the commercial insurance industry, offering a Walmart-Humana partnership the ability to retain a firm grip on the lucrative category.

Walmart and Humana already collaborate on a Medicare prescription drug plan that offers low cost-sharing to participating members. 

For Walmart, any deal would represent a major move into a relatively new area of business.  The retail giant is fighting for dominance on many fronts as online shopping and near-instantaneous shipping continue to eat into its traditional business model. 

The struggle invites an inevitable mention of Amazon, which is also dabbling in the healthcare environment. 

Snagging a major health insurer now may help Walmart to head off Jeff Bezos’ efforts to revise the existing insurance marketplace – as well as Amazon’s growing interest in generic drug manufacturing and medical supply distribution.

For Humana, a buy-out of some description would accomplish what the insurer failed to manage last year as its merger with Aetna crumbled.  Antitrust concerns dashed the deal, valued at $37 billion, forcing Humana to look elsewhere to shore up its financial health.

While Reuters reports that it was Walmart that approached Humana, the health insurance company may not be completely unreceptive to the prospect, given its willingness to pursue the Aetna collaboration.

For consumers, the benefits are somewhat less clear.  Pharmaceutical costs may or may not decrease in this unknown environment, and consumer choice may in fact suffer as these mega-merger conglomerates take over the market.

The impact on long-term patient-provider relationships and chronic disease management is also unknown.

While the availability of retail clinic sites directly aligned with a consumer’s health insurance products may help the delivery of basic primary care services to those unable to access more traditional options, it could also drive patients away from physician-led primary care homes that offer much more comprehensive services.

Balancing convenience with more holistic population health management will be a challenge for Walmart, CVS Health, and other retail clinic operators that will become financially responsible for a patient’s entire set of needs through its insurance products.

The ability to access a patient’s entire claims history, matched with their pharmacy data and even consumer data from retail shopping, will certainly help payers keep tabs on their financial responsibilities. 

But should a Walmart-Humana deal pan out, it will take a significant investment from both parties to tackle the many market challenges that will arise from participation in the brand new era of the healthcare mega-merger.