- Walmart may purchase health care company Humana
- The combined entity would make Walmart one of the largest health services providers
- The potential merger is part of a consolidation trend between retailers and healthcare companies
Big box shopping giant Walmart is reportedly in early talks to acquire the health insurance provider Humana in a deal that could be worth at least $37 billion, Walmart’s largest acquisition ever.
A potential merger could strengthen Walmart’s footing in the health insurance market, where it already has pharmacies and walk-in clinics.
Also key: This merger could allow it to compete with other retailers actively involved in reshaping the healthcare market: Namely E-commerce giant Amazon, which also has its sights on the healthcare industry.
“In addition to selling prescription pills, Walmart could develop a pretty attractive line of business with walk-in or by-appointment clinics,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business told CNN recently.
What’s a strategic acquisition?
If the deal materializes and is approved by regulators, it would be what’s known as a strategic acquisition. That means it would join the strengths of both companies, making the combined entity bigger than the individual parts. For example, Walmart would instantly become one of the biggest health insurance providers in the country, according to reports.
Among other tactics, Walmart could use data from Humana’s 14 million customers, to target them as potential Walmart shoppers. Humana could also guide its customers to Walmart pharmacies to fill prescriptions, or clinics for medical services. Walmart has a large network of 4,700 pharmacies, located in many of its stores.
Similarly, Humana is one of the largest providers of Medicare Advantage plans in the U.S., and reportedly has an array of clinics in states including Florida and Texas, where Walmart also has a strong presence.
For its part, Walmart has nearly 5,000 retail outlets in the U.S., and employees 2.2 million people around the world.
Meanwhile, senior citizens enrolling in Medicare are one of the fastest growing segments of the populations in the U.S. with approximately 10,000 people turning 65 every day.
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Healthcare, retail and mergers
- In February, 2018 grocery store chain Albertson’s said it will spend $24 billion for Rite Aid stores that did not go to drug store chain competitor Walgreens in an earlier deal.
- In December, 2017, CVS announced it would acquire health insurance company Aetna in a deal worth $69 billion.
- in March, 2017, health insurance provider Cigna said it would acquire Express Scripts for an estimated $54 billion. Express Scripts is a pharmacy benefits management company.
Why so many moves into health care?
The planned mergers come at a time when U.S. consumers are increasingly uncertain about what will happen in the health insurance market. In December, as part of the tax overhaul legislation, Congress approved changes to the Obama-era Affordable Care Act, getting rid of something called the individual mandate, which is expected to weaken health care exchanges and potentially drive up costs.
Among other tactics, Walmart could use data from Humana’s 14 million customers, to target them as potential Walmart shoppers.
In January, E-commerce titan Amazon, business conglomerate Berkshire Hathaway, and mega-bank JPMorgan Chase announced they will collaborate to offer their U.S.-based employees solutions for better and more affordable health care.
A game of monopoly
The U.S. Department of Justice blocked mergers between healthcare companies Humana and Anthem in 2017, on grounds that the merger could create a monopoly in the healthcare market.
Similarly, it prevented Anthem from acquiring Cigna the same year. The round of planned deals between retailers and health care companies–from Albertson’s and Rite Aid to to Walmart and Humana–must all also be approved by the DOJ.