Wal-Mart and Humana: How Healthcare on Wall Street Imitates Hollywood

By Clive Riddle, March 30, 2018 Hollywood notoriously chases a hot movie trend with much more of the same – imitation being the most sincere form of flattery.  Wall Street when it comes to healthcare continues to flatter Hollywood by imitating this strategy as best they can. In the 1980s, public hospital companies rushed to acquire health plans. They subsequently rushed to spin-off or otherwise unload them. That’s how Humana become just a health plan company. In the 1990’s, the PPM industry was born as integrated delivery systems where split up, giving birth to PhyCor an others who subsequently flamed out. More recently, on the heels of ACA implementation, the mantra was to increase clout to succeed in the Marketplaces and expanding Medicaid and Medicare Advantage programs. Aetna announced the Humana acquisition and Centene announced the HealthNet acquisition within a day of each other in early July 2015. Three weeks later Anthem announced the Cigna acquisition. Then in February 2017, Aetna-Humana and Anthem-Cigna separately announced on the same day the death of their proposed mergers, thanks to DOJ opposition, and in Anthem-Cigna’s case, merger indigestion. Additionally, the new Trump administration and Republication Congress’ zeal for Repeal made the merger’s marketplace strategy seem moot. But a year later a new blockbuster movie formula has developed. There is Amazon style retail market disruption looming over the pharmacy sector in particular but the rest of healthcare as well, and the specter of the mysterious Amazon-BershireHathaway-JPMorgan healthcare venture. There is the outcry over pharmaceutical costs, and the questioning of the PBM sector’s role.  From this backdrop the CVS-Aetna merger emerges in early December.  Then early this month Cigna announces their Express Scripts acquisition. And now the Wall Street Journal and many others report Walmart is in early stage acquisition talks with Humana. WSJ notes the annual revenue of WalMart is $500 billion and Humana’s is $54B, compared to $185B fir CVS, $61B for Aetna, $42B for Cigna and $100B for Express Scripts. Will the Walmart-Human movie deal get inked? Will any of these new projects make it through production and get released? And what sequels and similar projects are under development?