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    Published on: March 30, 2018

    The Wall Street Journal is reporting that Walmart, the biggest retailer in the world, is in “preliminary” discussions to acquire Humana, a health care serves company with a $37 billion market value.

    The Journal writes that not only would this be Walmart’s biggest acquisition ever, but also a deal “that would mark a dramatic shift for the retail behemoth and the latest in a recent flurry of big deals in health-care services … A Walmart-Humana deal would cap a series of transactions that could transform the business of managing health care.”

    Here’s some context provided by the Journal:

    “Should there be a deal - and should regulators and shareholders bless it - it would transform Walmart overnight into one of the nation’s largest health insurers. It would immerse the company in a complicated industry, one that continues to evolve eight years after the Affordable Care Act was enacted and as Washington remains deeply divided over health-care policy.”

    From CNBC:

    “The news comes amid a rush of deal chatter as insurers are under pressure to lower medical care costs. In December, CVS Health announced a $69 billion deal to buy insurer Aetna. That deal would combine CVS pharmacies, pharmacy benefit manager platform and Aetna's insurance business.

    “Online retail giant Amazon has pledged to partner with J.P. Morgan and Berkshire Hathaway to tackle rising employee health-benefit costs. CNBC has also reported that Amazon has participated in exploratory talks with generic-drug makers."

    From Bloomberg:

    “An acquisition of Humana’s size -- $37 billion -- would be rare for Walmart, which has mostly been focused on buying e-commerce companies, including last year’s deals for Bonobos Inc. and ModCloth. But the company still gets plenty of shoppers in physical stores who rely on its 4,700 pharmacies in the U.S. Like drugstore chain CVS, Walmart could use a partnership with an insurer, or even a merger, to take on a more powerful role in the delivery of medications to consumers.

    “Walmart and Humana already work together on prescription drug plans for individuals in the U.S. Medicare program. The plans offer some prescriptions for as little as $1, as long as customers pick up their drugs at a Walmart or Sam’s Club. Walmart could use a closer tie-up to steer more of Humana’s customers to its stores through its drug coverage arrangements.”
    KC's View:
    Yes, I know I’m supposed to be off today. But this was too big a story to leave until Monday.

    Walmart has pharmacies in most of its 4,700 US stores, and also is the nation’s largest employer; it is possible that a deal with Humana could allow it to save money on some of its internal insurance costs. But the big “get” would be allowing Walmart to expand its own ecosystem, giving it a bigger role in the nation’s healthcare business and greater access to seniors on Medicare and people who use Humana to help manage their care.

    The mind boggles at the degree of pain that these two bureaucracies would endure in order to integrate their operations - to the degree that they would have to be integrated. But it hard to imagine that there wouldn’t be some sort of culture clash.

    Just the fact that we’re talking about the possibility of such a deal is an indication of what different companies will do in order to blunt Amazon’s aggressive move sin a lot of markets, and of how the health care business seems to be changing in some profound ways. I wish I had a lot of confidence that all these moves will make health care better and cheaper, but it is hard for me to work up a lot of optimism about this.

    This may be my own unfair bias, though. I hear about Amazon thinking about healthcare, and I get curious and maybe a little anticipatory. I hear Walmart healthcare, and I get worried.

    That may not be fair. So let’s see what happens, and give Walmart credit for thinking about its world in different ways.