Cleanup on Aisle 6: Seven possible results of a Walmart–Humana deal
When The Wall Street Journal first broke the news that retail titan Walmart is talking with Humana about possible acquisition, it seemed a bit far-fetched.
Sure, the two market a profitable co-branded Medicare Part D plan in which Walmart’s stores serve as the preferred pharmacy network. And Walmart does have walk-in health clinics in some of its big-box stores, many of which are leased to and operated by local providers. But a possible merger?
Maybe. Or it could be some kind of joint venture in healthcare that would benefit both partners: bringing customer traffic to Walmart stores, adding membership and geographic expansion opportunities to Humana, and enabling both parties to take advantage of the fast-moving changes and opportunities in healthcare coverage, service delivery, the drug supply chain, and healthcare regulation.
Both parties are looking warily at their major competitors’ moves with understandable trepidation. CVS’ pending acquisition of Aetna could strengthen the competition versus Humana’s Part D plans and equip Aetna’s growing Medicare Advantage portfolio with the added benefit of integrated services and pharmacy consultation at CVS in-store clinics. Another pending deal — Cigna’s purchase of Express Scripts — adds to its capacity in mail-order and specialty pharmacy.
And then there’s Amazon, a chief competitor of Walmart that has hired dozens of knowledgeable pharmacy and health benefits business leaders in its planning of … whatever big, disruptive innovation it’s planning in the healthcare space. A Humana–Walmart union merges two companies threatened by Amazon’s plans.
Meanwhile, Walmart is trying to beef up its new online shopping business to compete directly against Amazon’s smiley-box deliveries. But like all retail stores, it has to build traffic to its brick-and-mortar locations. So, what could it do with Humana, either as JV partner or as a subsidiary? Here are seven ideas:
- Walmart, currently the nation’s fifth-largest pharmacy (4,700 pharmacies), may want to team with and expand Humana’s in-house PBM to make sure it can compete more effectively against CVS–Aetna and Amazon, particularly in negotiations with pharmacy manufacturers and in home delivery of medical supplies and pharmacy. The buying clout of a combined Walmart–Humana could further drive down wholesale drug prices.
- In the not-too-distant future, Walmart may want to market Humana–Walmart low-cost, non-ACA compliant “temporary” individual commercial plans in states with favorable regulatory climates.
- Walmart may want to form regional small business purchasing clubs that could market Humana–Walmart Association Health Plans to small groups, pending favorable rulemaking from the Trump administration. Such plans would not meet Obamacare requirements and typically have numerous limits and exclusions to contain costs and discourage sign-ups by unhealthy groups.
- Walmart and Humana could leverage the retailer’s in-store clinics as part of Humana’s integrated clinic system, offering low-cost or free pharmacy consultation, telehealth, and chronic care management services to Humana MA enrollees. Compared to CVS’ MinuteClinics, Walmart store clinics have an advantage of greater space where a broader range of services could be established.
- Humana has a strong relationship with providers, with more than 900 ACOs across the nation. Walmart has contracted directly with providers (Geisinger and Mayo Clinic) through its Centers of Excellence Network to provide its employees better integrated care. Humana could facilitate expansion of a full value-based care network for Walmart, the nation’s largest private employer with 2.3 million workers.
- A Walmart–Humana merger also hints toward big data sharing and enhanced technical/digital services. Combined customer data with dimensions from both retail and health could leverage deeper consumer analytics. Such analytics would allow Humana to identify members in need of dietary changes, providing free or heavily discounted fruits and vegetables from Walmart, for example. Humana operates a Digital Center of Excellence, which has created innovative tools to manage prescription drugs and personalized digital experiences for its members.
- Walmart’s reported moves to acquire PillPack could bring in another asset for Humana. The company sorts and combines the multiple medications of its customers into date- and time-stamped pill packets that can help seniors manage their multiple medications. This asset could be an important differentiator for purchasers of Humana’s Part D and MA plans, particularly those with many medications and failing memory.
Given the dizzying speed of technology-enabled business innovation in healthcare and in delivery of goods and services, and the deep pockets and compelling business needs of the players, we will probably see more of these sounds-odd-at-first combinations in the coming years and months. In an age of growing technological possibility and a critical need to contain cost, the possibilities are endless.
Paula Wade tracks and analyzes the national trends in the U.S. health insurance industry, and her work can be found in DRG’s National Managed Care Organization Analyzer series. Follow her @PaulaWadeDRG.
Sonali Prusty is a pharmacy benefit market expert, and her work can be found in DRG’s PBM Profile series. Follow her @SPrustydrg.
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