Come for your drugs, leave with more shopping: Walmart’s new growth strategy?
NEW YORK (Reuters) – Walmart Inc’s efforts to develop closer ties with health insurer Humana Inc , which came to light on Thursday, point to a brave new world of retail where superstores become healthcare centers offering basic medical care.
They are also aimed at boosting Walmart’s slowing growth in brick-and-mortar store sales as it faces increasing pressure online from Amazon.com Inc . Deepening its existing partnership with Humana, or even acquiring the company outright, could be a step toward turning its 4,700 or so US stores into healthcare centers that aim to attract more shoppers over 65.
“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.”
Walmart approached Humana this month, and the companies began to discuss closer ties focused on new partnerships, two people familiar with the matter told Reuters on Thursday. An acquisition of Humana by Walmart is also being discussed, the sources said.
Walmart declined comment Friday. Humana could not immediately be reached for comment.
Closer ties between the two could enable the retailer to tap into Humana’s patient roster and possibly put some of its physician clinics in stores to offer medical care to customers.
Walmart is the largest retailer to hit upon the combination of retail and health insurance, but it is not the first.
CVS Health Corp has struck a $69 billion deal to acquire Aetna Inc .Separately, insurer Cigna Corp has a $54 billion deal to buy pharmacy benefits
company Express Scripts Holding Co . The two deals, if approved, will put pressure on the entire health care supply chain.
Humana could provide Walmart with “one more way to checkmate Amazon and equal and eclipse the CVS/Target partnership and equal and eclipse the CVS/Aetna partnership,” said Burt Flickinger at marketing consulting firm Strategic Resource Group.
“It allows them to get ahead of everybody from warehouse club operators like Costco, Target and other retailers who run chain drugstores as well as food and drug combo operators like Kroger and Wegmans.”
Bentonville, Arkansas-based Walmart already has pharmacies at many store locations and has a co-branded drug plan with Humana that caters to patients using Medicare, the federal health insurance program for people over 65. That plan steers patients to Walmart stores for their pharmacy needs, offering customers an opportunity to save up to 20 percent on drug costs, analysts said.
Louisville, Kentucky-based Humana is one of the country’s largest providers of Medicare Advantage plans – a type of coverage offered by a private company that contracts with Medicare.
Humana has 5.1 million seniors on prescription drug benefits and another 3.5 million on full medical benefits, according to Ana Gupte, senior health care analyst with Leerink Partners in New York.
Walmart superstores “could be a one-stop shop for seniors,” said Gupte, adding that Humana already has about 50 pharmacies sharing locations with doctors’ clinics, and could expand that model using Walmart’s real estate and pharmacies.
There is also a potential for Walmart and Humana to benefit from their mass of customer data, said Neil Saunders, managing director of GlobalData Retail.
“One thing retailers have is a very good understanding of customers. They know their eating habits and other consumption patterns and that is quite useful in forming insurance decisions,” he said. “That is certainly something that Walmart would be able to leverage.”
Humana patients are most likely already heavy shoppers at Walmart, according to David Friend at the BDO Center for Healthcare Excellence and Innovation.
“If you know that somebody is on a certain medicine you can sell them other products and services and that will help keep customer loyalty,” he said.