Walmart is Looking to Expand into Healthcare

According to The Wall Street Journal, Walmart is engaged in preliminary discussions with Humana, which could lead to an acquisition of the health insurer.

The healthcare industry is undergoing a huge transition. Not only are healthcare providers looking to merge but technology companies are jumping into the arena, as well.  Most notably, CVS is buying insurer Aetna, insurer Cigna is purchasing Express Scripts, and Amazon has formed a partnership to reshape the purchasing of health insurance

Not to be outdone, it seems Walmart has expressed interest in getting into the healthcare business. Though Walmart already has pharmacies within its retails stores, this purchase would allow them to gain access to the larger Medicare market. Walmart operates 4,700 in-store pharmacies, a number of primary care clinics, and it has started offering lab tests.

4 reasons Walmart would want to buy insurer Humana

In a recent CBS MoneyWatch article explains 4 ways Walmart would benefit from purchasing Humana:

1. Tap the Medicare market
   Humana is the second-largest provider of Medicare Advantage plans, the private insurance programs offered through Medicare. Walmart already fills prescriptions for many seniors at its pharmacy locations. Offering Medicare Advantage sign-ups at those pharmacies could help a combined Walmart-Humana grab more of the market.
2. Compete against Amazon
   Amazon and Walmart are both heavily investing in their retail services and are always looking for ways to add new services for their customers. If Amazon jumps into health care, Walmart will need to be able to compete.
3. Increase profit margins
   Retail is a notoriously tough industry for profits, and it’s only getting worse. Consumers are increasingly cost-conscious and unwilling to buy products at full price. Walmart’s net income has declined in recent years, while Humana’s profit has more than doubled.
4. To gain a data trove on customers
   Humana would deliver an entirely new data set to Walmart, shedding light on consumer health issues and behaviors.

A deal between Walmart and Humana would have an interesting impact on other health plans. Due to its sheer size, Walmart could put further pressure on pharmacy prices and help lower drug prices for other health plans.

Though this merger is still only in early talks and, so far, there has been no announcement of a pending deal, it will be interesting to keep an eye on how this progresses.