Walgreens partnership would give Humana more leverage in shifting market

Humana building
A deeper partnership between Humana and Walgreens could be mutually beneficial. (Humana)

Following a report that Humana and Walgreens are in discussions to take equity stakes in one another, one analyst says the move would allow the insurer to keep pace with surrounding vertical integration.

A formal partnership would also dispel any chance of a Walmart takeover, rumored earlier this year

On Tuesday, The Wall Street Journal reported Humana and Walgreens were in preliminary discussions to broaden an existing partnership and take equity stakes in one another, citing sources familiar with the talks. Earlier this year, the two companies announced a partnership to operate senior-focused on-site clinics in Kansas City, Missouri. 


13th Partnering with ACOS & IDNS Summit

This two-day summit taking place on June 10–11, 2019, offers a unique opportunity to have invaluable face-to-face time with key executives from various ACOs and IDNs from the entire nation – totaling over 3.5 million patients served in 2018. Exclusively at this summit, attendees are provided with inside information and data from case studies on how to structure an ACO/IDN pitch, allowing them to gain the tools to position their organization as a “strategic partner” to ACOs and IDNs, rather than a merely a “vendor.”

Discussions between the two companies are still early and wide-ranging, so there's a chance no deal will be finalized. 

RELATED: Humana, private equity firms complete acquisition of Kindred Healthcare

But if the healthcare giants move forward with a formal partnership, it could better position Humana to compete with the likes of CVS-Aetna and Cigna-Express Scripts. Both of those deals are expected to close in the coming weeks

The partnership is likely more sales and marketing-oriented than clinically focused, Leerink Partners analyst Ana Gupte, Ph.D., wrote in a research note (PDF) to investors. It may point to success in the Kansas City pilots. 

"[Humana] with their 5-star rated plans can market year-round, driving much more incremental value for them in such a strategic partnership and investment," Gupte wrote. 

Depending on the scope, a partnership between Walgreens and Humana could be mutually beneficial, she said. Walgreens, with its retail footprint and pharmacy presence, could help Humana compete with vertically integrated giants including CVS-Aetna and UnitedHealth. Humana, meanwhile, could bolster Walgreens against threats from Amazon and its recent PillPack purchase

Shared equity stakes would also allow the two companies to share their economic pools around medial loss ratio, retail clinic margins and pharmacy. 

The "partnership can bring an end-to-end healthcare experience for American seniors," Gupte wrote. 

Suggested Articles

The FTC is suing Surescripts, accusing the health IT company of employing illegal restraints to maintain its monopolies over the e-prescribing market.

Group plans for small businesses may offer a lower-cost option in comparison to individual market coverage, according to a new report. 

Ohio’s attorney general is continuing his war on PBMs, this time by proposing a multi-step plan to improve transparency and lower drug costs.