As if the health care-merger frenzy weren’t wild enough already, it looks as if Walmart Inc. may soon dive into it.
The mammoth discount retailer is reportedly in early-stage talks to acquire Humana Inc., a health insurer valued at $41 billion (based on Thursday’s after-hours trading price, which spiked on the late news).
The potential merger comes on the heels of a December offer from drug-store chain and pharmacy-benefits manager CVS Health Corp. to buy insurer Aetna Inc. for $77 billion including debt — and we mean a lot of debt (more on that later). There was also the $67 billion merger announced this month between Cigna Corp. and Express Scripts Holding Co., a similar pairing.
Driving all this dealmaking is the fact that Amazon.com Inc. — a recent target of ire for President Donald Trump — has its eye on health care. It struck an alliance in February with Warren Buffett’s Berkshire Hathaway Inc. and JPMorgan Chase & Co. to tackle employee health costs. The trio’s initial focus will be on their workers, but the threat of Amazon even dipping its toe into the industry has the biggest players scrambling to respond.
Bloomberg News reports the Walmart-Humana talks are about deepening an existing partnership, and that while a merger is among the options being explored, an outright combination isn’t likely at this point. Given Walmart’s sizable pharmacy presence, getting hold of Humana’s pharmacy-benefits management (PBM) business would be appealing, though.
Humana is by far the largest PBM remaining for potential suitors and could help Walmart keep drug costs down. It already manages $26 billion in annual enrollee and client drug spending.
Humana also has the second-largest Medicare presence of any insurer, fitting nicely with Walmart’s customer base. Some of Humana’s Medicare Part D enrollment actually comes from a partnership with Walmart — the two companies offer a co-branded drug plan that drives traffic to Walmart stores.
Buying Humana would help Walmart attract even more enrollee traffic and drive patients to its in-store clinics. It would boost revenue and give Walmart a captive customer base — all of which will help it fight Amazon on the retail and grocery fronts.