Brainstorm Health: The Walmart Humana Deal, Apple Health Records, Pfizer Rare Heart Drug

Sy has a smart take on this development below—and you should also read my colleague Polina Marinova’s breaking analysis in FORTUNE’s Term Sheet this morning. But one thing worth highlighting is how central one key demographic is to this seemingly out-of-the-box M&A move—and that’s the prodigiously sized generation of Medicare recipients.

A whopping 79% of Humana’s total premiums and services revenue comes from Uncle Sam—through individual and group Medicare Advantage plans and other stand-alone prescription drug plans, according to the company’s latest 10-K filing with the SEC (see page 5). Humana offers at least one type of Medicare plan in each of the 50 states.

That same silver-domed demo, of course, is core to Walmart: Millions of seniors not only shop at its stores but also pick up their scrips there, too. The world’s largest employer (after the U.S. Department of Defense and the People’s Liberation Army) also just happens to be the 4^th largest operator of pharmacies in the U.S., with $20.6 billion in 2016 prescription drug sales, according to Pembroke Consulting (and my all-knowing colleague Phil Wahba). That makes Walmart-the-drug-chain bigger than Rite Aid.

And like CVS, Walmart has been energetically incorporating primary care clinics in many of its stores too. (That’s a direction Humana had been heading as well: It has nearly 200 clinics that it operates on its own or in joint ventures, according to Modern Healthcare.) The idea of combining these resources—and encouraging Humana plan members to get their primary care through Walmart clinics, get their meds through Walmart pharmacies, and shop in the healthy fruit and veggie aisles at Walmart groceries—makes good, simple sense.

Which is why the race is on. Kroger’s going to buy (or be bought by) somebody in this space. Mark my word.

DIGITAL HEALTH

Apple Health records launches with 39 health systems. Months after rumors of a new personalized health records system compatible with the iPhone emerged, Apple has begun rolling out the medical records initiative for users at more than 100 hospitals across 39 health systems (including names like Stanford and Johns Hopkins). Users will be able to access a swath of (ultimately limited) information, such vaccinations, lab results, and allergy data.(The Verge)

INDICATIONS

Pfizer surprises with rare heart disease drug success. Drug giant Pfizer celebrated the 20th anniversary of its blockbuster Viagra earlier this week; it followed up with some promising data on the opposite side of the drug development chain in a bit of a surprise. Tafamidis, an experimental treatment for a rare, genetic, and progressive heart failure, "showed a statistically significant reduction in deaths and frequency of cardiovascular-related hospitalizations compared with a placebo" two and a half years out, according to CNBC.(CNBC)

THE BIG PICTURE

Hawaii on track to be 7th state to approve medical aid-in-dying legislation. The Hawaiian legislature is sending an aid-in-dying bill to the governor's desk. It's more or less expected to be signed; if it is, Hawaii would become the 7th state behind California, Colorado, Montana, Oregon, Vermont, and Washington (plus the District of Columbia).(Reuters)

Walmart Humana cometh. The specter of a deal between Walmart and Humana tossed a bit of extra drama into the ongoing saga of health care M&A (not to mention the weekend). Cliff offered his insightful thoughts above on how such a potential arrangement is driven by America's seniors, who occupy a special space in the U.S. medical ecosystem (and are among Humana's and Walmart's major customer bases, with the former specializing in Medicare Advantage plans). I spoke with PricewaterhouseCoopers partner (and U.S. health services sector leader) Gurpreet Singh about some of the other trends influencing the deal, as well as other ambitious corporate marriages like CVS-Aetna, Cigna-Express Scripts, and others across the medical spectrum. Two words that sum it all up? "Vertical integration," says Singh. "There will be more deals that are like this, and there will also be more that are aligned towards new entrants in the space." With the failure of high-profile attempts to integrate horizontally (for instance, scuttled deals like Anthem-Cigna and Aetna-Humana) within industries, companies are increasingly looking to go up and down the supply chain to boost margins, scale, data collection, and (optimistically) improve the patient experience by offering easier-to-access medical homes. We'll have much more on this in the coming days. (Fortune)

REQUIRED READING

Why Drug Overdoses Are on the Rise and Getting Worse in America, by Sy Mukherjee

Here's How to Keep Track of China's Space Station As It Plunges Into Earth, by Chris Morris

Smugglers Used Drones to Drop $80 Million of iPhones into China, by Don Reisinger

Former Obama Administration Official Heads to Netflix Board, by Jonathan Vanian