Are Healthcare M&A Trends a Harbinger of Things to Come?
An interesting merger and acquisition (M&A) trend is emerging in the healthcare industry and it is being led by some unlikely suspects—retailers and e-commercial behemoths .
For example, it was reported in late March that Walmart Inc. was in preliminary talks to buy health insurer Humana Inc., a deal that would be the latest ground shift in healthcare service provision, and a sizeable one considering Humana’s $37 billion market cap.
Walmart, already one of the largest pharmacies in the country, could present itself as a one-stop shop for Humana's 14.2 million policyholders and bring in new customers with an expanded focus on health and wellness. The deal, if consummated, would make it Walmart’s biggest deal by far.
Humana’s stock jumped on the day of the report by 13.5% and has since been trading at all-time highs.
If Walmart’s reported interest in acquiring or expanding its relationship with Humana materializes, market observers point out that it would be the widest-reaching move toward transforming retail from a seller of goods to a seller of health.
Early-stage deal talks between the two are already creating anxiety within the hospital sector, which has seen slow growth and competition from cheaper healthcare options
The potential merger comes as other retailers consider participating more in the health services and healthcare markets, including drug store chain and pharmacy-benefits manager CVS Health Corp., which in December, offered to buy insurer Aetna Inc. for $77 billion, including debt. There was also a $67 billion merger announced in March between Cigna Corp. and Express Scripts Holding Co.
Albertsons Companies, the privately held owner of Safeway, Vons and other grocery brands, in February acquired Rite Aid, the nation's third-largest drugstore chain, for $1.83 billion in cash.
And, we can’t forget Amazon’s alliance with Berkshire Hathaway and JPMorgan Chase & Co., announced in January, to form an independent healthcare company in a bid to drive down costs and streamline inefficiencies for employees and consumers.
Are retailers’ interest in participating more in the healthcare market an anomaly or the start of a new trend? What impact will the Trump Administration play into these mergers, especially as Amazon seeks to nab a piece of the health industry pie at a time when Trump’s public disdain toward Amazon and its CEO Jeff Bezos continues on full display? Time will tell.