What’s Walmart’s Gameplan with Humana?

Rumors are circling that Walmart (WMT) might be acquiring Humana (HUM) or, at the very least, deepening its partnership with the health insurer.

I have my own thoughts on the matter. As I shared with Reuters’ Nandita Bose,

“The end goal here is to get more people in their stores, get them to buy drugs and make an additional purchase while they are in the store,” said Charles Sizemore, founder of Sizemore Capital Management LLC, who owns shares of Walmart.

If Walmart can offer “competitive rates” on primary care and other health services, he said, it “can grow traffic and push store visits.”

To view full article see Come for your drugs, leave with more shopping: Walmart’s new growth strategy?

Walmart has been the master of cutting out the middle man for its entire multi-decade history, and the company is well known for squeezing its suppliers. By acquiring or partnering with a major health insurer, Walmart can guarantee rock-bottom pricing for prescription drugs. And if their ultimate goal is to simply attract more foot traffic to their stores, they can sell the drugs at breakeven, and it still makes economic sense.

Looking at the bigger picture, the government has failed miserably to contain health costs. And this is not a partisan complaint; the failure is shared by both parties. Yes, ObamaCare has been a disaster and accelerated healthcare inflation, but there would have never been political demand for the flawed program if either party had been successful in containing costs over the past several decades.

The private sector is stepping in where the government has failed. Walmart is potentially partnering with Humana, while Amazon (AMZN), Berkshire Hathaway (BRK.B) and JP Morgan (JPM) are working on a collaboration of their own to lower costs.

All of this is fantastic for consumers. Some of these attempts will almost certainly fail (success is created by trial and error, after all), but the important thing is that we’re seeing the beginnings of innovation. That’s good, because we sorely need it.

 

 

 

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