Walmart, the world’s largest retailer, has engaged in preliminary talks with Humana about acquiring the commercial health insurer, the Wall Street Journal reported Thursday, citing anonymous sources familiar with the talks.
Buying or merging with Humana (NYSE: [[ticker:HUM]]) would turn Walmart (NYSE: [[ticker:WMT]]) into one of the country’s biggest health insurers and advance the Bentonville, AR, company’s effort to become a destination for customers in need of medications or treatment.
The reported talks come as Amazon (NASDAQ: [[ticker:AMZN]]), which three years ago supplanted Walmart as the nation’s most valuable retailer by market capitalization, plots its own strategy for moving deeper into the healthcare industry. The Seattle e-commerce giant’s heightened interest in healthcare has caught the attention of large insurers, drugstore chains, and other organizations, some of which have been involved in recent mergers and acquisitions.
Louisville, KY-based Humana, the fifth-largest commercial health insurer in the U.S., is no stranger to acquisition talks. In 2015, rival Aetna (NYSE: [[ticker:AET]]) said it had agreed to buy Humana for $37 billion, but earlier this year a federal judge blocked the deal on antitrust grounds.
Late Thursday, Bloomberg published a separate report stating that Walmart and Humana were discussing a “closer partnership.” (The two companies have reportedly worked together for more than a decade on a Medicare drug plan in which patients get prescriptions filled at a Walmart store or Sam’s Club warehouse.) Humana and Walmart have discussed the possibility of merging, Bloomberg reported, but “an outright combination isn’t likely at this point.”
Walmart says it has 11,718 stores worldwide. About 4,700 of its locations are in the U.S., most of which have their own pharmacies, according to the Wall Street Journal. The company also operates primary care and urgent care clinics, which provide services to patients like flu shots. Last June, Walmart and Quest Diagnostics (NYSE: [[ticker:DGX]]) said they planned to start offering laboratory testing services at select stores in Florida and Texas.
Humana’s current market capitalization is about $37 billion, which would make it Walmart’s largest-ever acquisition if the companies agree to such a deal. The retailer has snapped up several e-commerce brands in recent years, including Bonobos, ModCloth, and Jet.com.
One popular view is that Walmart made its string of e-commerce acquisitions in a bid to become more competitive with Amazon. The two companies could now be poised to compete more fiercely in healthcare.
In January, Amazon said it was partnering with Berkshire Hathaway and JPMorgan (NYSE: [[ticker:JPM]]) to launch a not-for-profit joint venture aimed at lowering healthcare costs. Amazon also now sells an exclusive line of over-the-counter medications and other health products, as CNBC reported last month.
Industry observers have also speculated that Amazon could launch its own operation to manage prescription drug benefits for commercial and government-provided health plans. That type of business is known as a pharmacy benefit manager, or PBM.
Humana’s own PBM reportedly brought in about $21 billion in revenues in 2017. Still, it’s not as large as Express Scripts (NASDAQ: [[ticker:ESRX]]), the nation’s largest PBM, or CVS Health’s pharmacy benefit manager. Earlier this month, Cigna, another large health insurer, said it agreed to acquire Express Scripts in a deal then valued at $52 billion.
