Walmart and Humana, a merger or joint venture?

According to a WSJ article, the two companies are in talks on a merger.

What a lot of people don’t realize is that both companies already have a relationship.

According to the NY Times, since 2010, they have sold a co-branded prescription drug benefit (PDP) for Medicare recipients, which offers savings on certain drugs bought at Walmart’s pharmacies. The two companies are now discussing how to expand that partnership in ways that would help drive more traffic to Walmart’s 4,700 United States stores, while increasing Humana’s enrollment.

And this strategy makes sense. Consider that Walmart’s demographic skews towards baby boomers and seniors. According to the graphic below, almost 50% of a shopper survey done by Kantar Retail Shopper Scape fit either in the Baby Boomer segment or Senior segment. ALDI in the graph happens to be a Walmart brand as well!

Generation Walmart
Source. Kantar Retail Shopper Scape

That aligns strongly with Humana’s cash cow – Medicare Advantage – as the ranks of baby boomers swell.

To drive enrolment, Humana needs that traffic and continuous enrolment in Medicare Advantage.

According to Modern Healthcare, Humana divested Concentra Clinics – a nationwide urgent care clinic that it previously acquired. At the time of the divesture in 2015, the CEO was quoted “Though Concentra’s operations did not ultimately align with Humana’s strategy as well as we had originally anticipated, we believe Humana and Concentra have gained valuable insights into consumer behavior over the past several years that will serve us both well moving forward,”

Due to demographics, a Walmart partnership may be better than running scores of urgent care clinics AND driving traffic (Medicare Advantage or PDP plan) to them. Evidence may indicate that urgent care clinics skew towards an urban younger population which runs counter to Medicare/PDP Plans and Walmart’s segment population.