Healthcare’s Next frontier: Walgreens & Humana’s Equity Play

By CultureBanx Team

  • Walgreens & Humana to take equity stakes in each other

  • Currently Walmart is the nation’s 4th largest provider of prescription drugs

The burgeoning relationship between retailers and health insurance providers is continuing to grow as Walgreens (WBA +1.32%) and Humana (HUM +0.27%) are in preliminary discussions to take equity stakes in each other. This has us wondering would this new tie up with Walgreens take away from Humana’s partnership with Walmart (WMT 0.99%)?

Why This Matters: Walmart is the nation’s 4th largest provider of prescription drugs. The retail giants partnership with a health insurance firm is a win-win for the black community, since people would benefit from the companies combining big data in order to spur wellness initiatives. Currently they have a co-branded Medicare drug plan with Humana that steers patients to Walmart stores. The partnership offers a prescription drug plan that can save up to 20% in drug costs for customers.

“Both of them (ties to Walmart and Walgreens) are complementary,” Humana CEO Bruce Broussard. He added partnering with one does not restrict the other deal.

Drugstore owners like Walgreens and other health providers like Humana are looking for ways to diversify their products and services, according to the Wall Street Journal. For Walgreens, a closer connection with Humana could replicate similar benefits that they would experience from a full takeover.

The retail giants partnership with a health insurance firm is a win-win for the black community

However, if Walmart wanted to go beyond its current deal with Humana and possibly buy the company, it wouldn’t be cheap. The health insurer had a market valuation of $42 billion, as of last week’s close.

Situational Awareness: Deals in this space are heating up with CVS Health's (CVS -3.30%) $69 billion pending acquisition of insurer Aetna. Also, Cigna's (CI +0.69%) $54 billion proposed merger with Express Scripts is another major deal looming. Of course Walmart is also gearing up for Amazon’s (AMZN -0.97%) entry into the healthcare business as well.

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