Higher healthcare calling motivates
Senior Walmart executives regularly invoke the name of Sam Walton when it serves to reinforce a point regarding the company’s business model or the cultural principles on which Walton is said to have founded the company. Dr. John Agwunobi, president of health and wellness for Walmart U.S., took the practice a step further recently when he participated in a panel presentation with other top executives at a conference put on by the Center for Retailing Excellence at the University of Arkansas’ Sam M. Walton College of Business.
When it was Agwunobi’s turn to address an audience comprised primarily of Walmart suppliers, he shared a grainy video of Walton speaking at one of the company’s Saturday morning meetings. It was early 1992, and Walton was seated next to then president and CEO David Glass. He was bemoaning the healthcare system, the markup charged for various tests he was receiving and a general lack of price transparency. “I wasn’t there,” Agwunobi said, “but he used that opportunity to deliver a very personal message that Walmart has a purpose.”
That purpose, embodied by the company’s “save money, live better” value proposition, has become a more powerful force, motivating Walmart’s health-and-wellness strategies. “We want to lower the cost of health care so more people can have access to it,” Agwunobi said. “Every employer in this environment is facing amazing increases in the price of health care, and we think we might have a way to help them.”
He believes the concept of the productivity loop the company applies to other aspects of its business can work just as well in health care. By lowering prices so more people can buy products and services, the cost can be lowered to increase access so even more people can buy and prices can be lowered more and access improved further in a sort of virtuous cycle, according to Agwunobi.
Accordingly, he said Walmart is visiting with benefit managers and offering lower prices on pharmaceuticals, healthcare services, products and even grocery items, and is asking in return that the firms it works with incent their employees to come to Walmart and become customers.
Agwunobi’s example demonstrates how much more broadly Walmart is thinking about its potential role in an evolving healthcare delivery system, where cost promises to be the dominant consideration for decades to come and nutrition will play a great role. Just five years ago, Walmart took a much narrower view of the healthcare industry, and its focus was primarily on pharmacy. Now it is apparent the company is intent on extending its reach more broadly, even if the extent of its reach still is being defined, as was evident from a recent request for information the company distributed.
“Walmart intends to build a national, integrated, low-cost primary care healthcare platform that will provide [preventive] and chronic care services that are currently out of reach for millions of Americans,” the request for information stated. “Walmart intends to do this in an affordable and accessible way while maintaining or improving quality outcomes. Walmart seeks partners who have a care model or capability that can help dramatically drive down the cost of care, while maintaining or improving quality on a national level.”
Not long after the 14-page request became public, its objective was disputed, as Agwunobi issued a statement that said, “The RFI statement of intent is overwritten and incorrect. We are not building a national, integrated, low-cost primary care healthcare platform.”
While the release of the request and Agwunobi’s denial muddies the waters somewhat regarding near-term health initiatives, it shouldn’t come as a surprise that Walmart sees opportunity in occupying a more prominent position in the delivery of healthcare goods and services. That philosophy also extends to food, where Walmart has embarked on a plan to reformulate products so they have reduced sugar, salt and trans fats, while also increasing access to perishables in neighborhoods known as food deserts.
“We want to make shopping for healthy groceries easier. We will always be a house of choice and a place where customers can come to find all of the options, but we will help [them] understand which is which,” Agwunobi said.
Meanwhile, the company hasn’t neglected its prescription business, which now numbers nearly 3,800 pharmacies in the United States. As the company noted during the third quarter, the health-and-wellness business continued to perform well and produce a low-single digit same-store sales increase thanks to improved in-stock on nonprescription products and an ongoing partnership with Humana on a Medicare Part D program. The Humana program, now in its second year with a monthly premium of only $15.10 and low co-pays, has signed up more than 1 million people since it was launched in 2010.