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Market Buzz | Spring 2018

Notes on Recent Economic Developments
Market Buzz

Hospital sector nervously eyeing Walmart, Humana deal

The hospital sector is nursing chills as it watches a potential merger heat up between Walmart and Humana. Although no deal had happened at press time, The Wall Street Journal in a report April 2 described the talks as contributing to “deepening anxiety.”

The retailer and the insurer are in early-stage discussions, and a deal could expand a trend seeing insurers linking up with other sectors to take advantage of cheaper care offered increasingly through clinics and pharmacies.

Hospitals have nervously witnessed Walmart’s foray into health care, by way of pharmacies and primary care clinics and its direct negotiations with hospitals to price optimize medical procedures obtained through its employees’ health care plans, the WSJ report said.

The nation’s largest private employer, according to the WSJ, Walmart directly contracts with a small group of hospitals in fixed-price deals whereby its employees nationwide use the 12 facilities for some cancer care, spine, cardiac, weight loss, hip and knee replacement procedures.

One of the nation’s largest insurers, Humana is preparing to acquire, with two private equity firms, home health care and hospice services provider Kindred Healthcare, Inc.

Last year, CVS Health Corp. made a $69 billion deal to purchase insurer Aetna Inc., and health insurer Cigna Corp. announced plans last month to purchase pharmacy-benefit manager Express Scripts Holding Co. for $54 billion.

“These vertical deals are super exciting, mostly for the potential to keep people out of the hospital,” Yale university health economist Zack Cooper told the WSJ.

Chinese retaliate on Trump tariffs 

Some 128 American-made products could be subject to Chinese tariffs as high as 25 percent on imports in retaliation to the Trump administration’s planned tariffs on imports of Chinese steel and aluminum, The New York Times reported April 1.

The Chinese products bearing the new tariffs include wine, pork and seamless steel pipes.

In what could be a simmering trade war, the Chinese have indicated they could impose additional tariffs. The new tariffs levy a 15 percent duty on 120 products, including fruit and wine, and a 25 percent tariff on pork, which, the article underscores, is an important money maker in farming regions in states that voted for Mr. Trump.

The Trump administration has threatened $60 billion in tariffs on other Chinese-made products. Further Chinese retaliation could ensnare more valuable American exports, such as soybeans, the NYT report said. Additional Chinese tariffs also could impact Apple and other major American companies with significant Chinese consumers.

— Compiled by Jean Williams