• by Thom Forbes  @tforbes, March 30, 2018

Humana’s stock “soared as much as 13%” in after-hours trading and retail and healthcare analysts stroked their chins and offered insight after the Wall Street Journal reported yesterday that the Louisville, Ky.-based health insurer was in preliminary talks to possibly be acquired by Walmart, “among a range of options” that may or may not come to fruition.

“It isn’t clear what terms the companies may be discussing, and there is no guarantee they will strike a deal. If they do, the deal would be big: Humana currently has a market value of about $37 billion,” write Dana Mattioli, Sarah Nassauer and Anna Wilde Mathews in breaking the story.

“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,” Mattioli, Nassauer and Wilde Mathews point out.

“Walmart approached Humana earlier this month and the deliberations are preliminary,” two sources tell Reuters’ Carl O’Donnell and Greg Roumeliotis. “While the conversations have focused on new partnerships, an acquisition of Humana by Walmart is also something being discussed, the sources added.” 

The implications of the back-and-forth — even if nothing comes of it — are notable.

“That the deal is even being discussed shows how much both retail and healthcare are changing,” concludes Neil Saunders, managing director of GlobalData Retail, in an emailed commentary that includes five specific reasons specific why the tie-up might be worthwhile to the retailer.

Yes, competitor Amazon’s looming involvement in the evolving healthcare landscape is one of them. So, too, is its “potential to use customer data to improve decision making and health outcomes.” Add in the fact that “as country's biggest seller of food … [it] is in a unique position to help consumers lead healthier lives and make informed decisions about things like diet.” Consider also the “other linkages Walmart could make between healthcare and retail” and its need to “diversify for growth” and the logic of a deal emerges.

“There has been much speculation about other insurance companies or retailers eyeing a tie-up with Humana. Insurer Aetna was a suitor, though the proposed merger with Humana was scrapped after a federal judge ruled it would limit competition,” Grace Schneider and Charisse Jones remind us in USA Today.

“Then in December, Ana Gupte, a senior analyst at Leerink Partners, said that a rival insurer or a retailer like Walmart or Walgreens might make a play for Humana after drug-store chain CVS unveiled plans to buy Aetna for $69 billion in cash and stock,” they continue.

“Aetna's CEO Mark Bertolini announced this week that savings caused by that deal would be passed directly to consumers,” John Bowden reports for The Hill.

“We have always believed that consumers should benefit from discounts and rebates that we negotiate with drug manufacturers,” he said in a statement. “Going forward, we hope this additional transparency will encourage these companies to rationalize their pricing and end the practice of annual double-digit price increases.”

“Part of the recent merger frenzy stems from healthcare companies’ fear that Amazon … will upend the industry,” writes Tami Luhby for CNN Money. “The online retailer has made its own inroads into the sector, announcing in January that it would seek ways to address soaring health care costs for its own employees, rolling out a line of private label over-the-counter medicines and building a business selling medical supplies to doctors, dentists and hospitals.”

But “Walmart has a better chance to disrupt healthcare than Amazon,”  Larry Levitt, SVP at the Kaiser Family Foundation, tells Luhby. “People still get their healthcare in person and there are Walmarts all over the place.”

Walmart’s stock, meanwhile, “edged slightly lower in extended trade,” and it told CNBC’s Christine Wang “that it doesn’t comment on rumors and speculation” while Humana did not immediately respond a request to offer its perspective.

Ours is that anything that brings “transparency” into “healthcare” would be welcomed by consumers but we question whether they can be sold on the idea that massive consolidation between sectors is the way to achieve it. As if they had a voice in the matter …