What Does Wal-Mart’s Prescription Drug Plan Mean?

Retailing giant Wal-Mart announced a new program that will offer consumers $4 prescriptions for generic drugs (you can see the full list here: WMT-druglist).

Several commentators have already pooh poohed this as a mere publicity stunt in an election year.

WalGreens and CVS and and other pharmacies have gotten shellacked on
the news — as well they should (Target was relatively unchanged, while
Rite Aid has been a disaster for too long to remember). Wal-Mart
crushed many of the inefficient or simply "less efficient" supermarkets
when they moved into food retailing — I would expect they could have a
similar impact here.

In addition to selling this as a retail loss leader, I wouldn’t be suprised if Wal-Mart rolled out a targeted program for certain corporate health care providers — think either GM or Ford. It would be nice if someohow GM or Ford could lop off a few $100 from the cost of manufacturing each vehicle.

And given Wal-Mart’s heft, this could very easily have a significant impact on the entire health care system in the United States.

The program will be launched tomorrow starting in 65 stores (Wal-Mart, Neighborhood Market and Sam’s Club pharmacies) in
Tampa Bay, Florida; It will expand statewide  area, and will be expanded to the entire state in January 2007, and expanded nationwide later in the year.

Key components (via WMT’s press release) include:

$4 pricing will be available to
all pharmacy customers with a doctor’s prescription that can be filled via generic.

This program will be available to the uninsured; Insurance will
be accepted.

The program presently covers 291 generic medications from
many of the most common therapeutic categories.

The medicines
represented are used to treat and manage conditions including allergies,
cholesterol, high blood pressure and diabetes; Some
antibiotics, antidepressants, antipsychotics and prescription vitamins are also
included.

Fascinating stuff . . .

Source:
Wal-Mart Tests in Florida Its $4 Generic-Drug Plan
WALL STREET JOURNAL ONLINE NEWS ROUNDUP
September 21, 2006 12:49 p.m.
http://online.wsj.com/article/SB115884220108069974.html

What's been said:

Discussions found on the web:
  1. OldVet commented on Sep 21

    At least the drugs aren’t made in China. Or are they? If they carry it off, it’s a great plan, and bound to stimulate business for them.

  2. john trenouth commented on Sep 21

    India has a significant pharmaceutical production industry. I’m not sure though how many drugs sold here have been made there. The FDA even has an office there. So its not unthinkable that the pills are made in Asia.

  3. jn commented on Sep 21

    puts pricing pressure on drugs and CPI

  4. snook commented on Sep 21

    Hum, seems those other 2 pharmacy cos. receive over 90% of generic payments from med. plan reimbursments. so, they may not get as shillaced as the market thinks.

  5. Bob A commented on Sep 21

    Good for Walmart… The pharma industry is ripping off Amercans for billions per year for expensive drugs like Vioxx which cost hundreds of times what just as effective safer alternatives cost.

  6. Investor_K commented on Sep 21

    Many HIV drugs that cost $10,000/year and up in the US have been reverse engineered by companies in India, Brazil and Thailand. These sell for as little as $1/day there.

    Yes, I know, the US companies did the billions in research. But now, they are just adding additional meds for HIV that in many cases don’t offer anything substantially new, and they NEVER reduce the prices on drugs they have been selling for several years now. Certainly long enough to recover the initial development costs and enjoy more than reasonable profits.

    I would like to see Walmart use it’s buying clout to get some of these high ticket drugs reduced in cost. Canada and other countries use their bulk buying power to achieve this result. Too bad the Medicare drug bill precludes the US Government from negotiating a discount. Gee…wonder how THAT happened….

  7. John Pearson commented on Sep 21

    The real losers will be Caremark and similar companies that mark up generics significantly (per WSTJ) because they are cheap relative to non-generics. Walmart is effectively giving away their rent.

  8. stripedshirtguy commented on Sep 21

    Barry, you’re off the mark. Tthis program caters to the cash business, which has limited relevance to Walgreen’s, CVS, etc. Also, you’re forgetting that the traditional pharmacies are largely successfuly because of convenience–it’s all about getting the customer out of the store quickly. These people aren’t going to suddently start shopping at Wal-Mart if they have to drive an extra hour on top of waiting in a longer line. This move is really all about Wal-Mart struggling in the pharamcy business, particularly as Part D has taken off.

  9. V L commented on Sep 21

    WSJ: “Generics made up about 56% of all prescriptions filled last year, but only 13% of drug spending.”

    I think it is self explanatory as to why it is a publicity stunt. We are talking about only 13% of drug spending.
    In addition, it is not clear about what is covered under this $4 plan and how many pills included in it; some prescriptions may be only for 5 pills (antibiotics) and some for 90 pills (antidepressants).

  10. V L commented on Sep 21

    From Reuters:

    “The initiative could help jump-start Bentonville, Arkansas-based Wal-Mart’s pharmacy business, revenue of which declined slightly in the most recent fiscal year.”

  11. V L commented on Sep 21

    From Bloomberg:

    “Wal-Mart will consider cutting prices nationwide after it studies the results in Florida, the people said. The Bentonville, Arkansas-based company is reducing prices on generic versions of 200 to 300 top prescription drugs. Some will cost as little as $4, compared with an average now of $25 to $30, said the people, who declined to be identified because the plan won’t be made public until later today. ”

    “Some will cost as little as $4”??? Which ones??? How many pills???
    I guess the prescription for 5 pills of an antibiotic will cost $4 but if you need 90 pills for your blood pressure you would have to pay $72 (90*4/5)

  12. Barry Ritholtz commented on Sep 21

    Geez! And people say I’m cynical —

    Generics made up about 56% of all prescriptions filled last year — so how is this a bad thing for those who are price sensitive?

  13. V L commented on Sep 21

    From MarketWatch:

    “Target Corp Thursday evening said it is lowering prices on a number of generic drugs in the Tampa Bay area, effective immediately. The retailer said the move is consistent with its long-standing practice to be price competitive with Wal-Mart Stores Inc.”

    Here we go, the competition has already responded. The consumer will probably benefit from these price wars.

  14. Cherry commented on Sep 21

    It is a election stunt and very limited. Sort alike that Drug prescription thing…………………..

  15. Mark commented on Sep 22

    Cherry-

    What Senate seat is WMT running for?

  16. wmtsux commented on Sep 22

    Yes hurray WMT! Perhaps now they can offer health benefits to their workers ala SBUX. Let’s be careful about praising these retail robber barons.

  17. me commented on Sep 22

    “”Some will cost as little as $4″??? Which ones??? How many pills???
    I guess the prescription for 5 pills of an antibiotic will cost $4 but if you need 90 pills for your blood pressure you would have to pay $72 (90*4/5)”

    Actually, “Wal-Mart said in a statement the price “covers 291 generic medications that are commonly prescribed to treat conditions such as diabetes, cardiovascular disease, asthma, cold viruses and infection.””

    So you would buy 3 30 days supplies and in my case the $12 for generics is one hell of a lot cheaper than Merck Medco charges me for 90 days of generics.

    As for Indian drugs that are re engineered, I am not interested. They don’t abide by the rule of law, so what makes you think safety laws are many more important to them? Who inspects the factories in a country where bribes rule the day?

  18. bob commented on Sep 22

    Is WalMArt allowed to import any drugs?

    I can’t beleive any domestic firm is making $4 generics…

  19. jpmist commented on Sep 22

    As a dentist I can order pharmaceuticals from my dental supply company. The retail markup is truly amazing. Ordering in lots of 100:

    Amoxicillin 500 mg – 18 cents/pill
    Diazepam 10 mg (Valium) – 13 cents/pill
    Lisinopril 20 mg (for BP) – 30 cents/pill

    So with Wal-Marts purchasing power, they’re still making money at $4 for a months supply and getting Seniors to shop for more while they’re there. . .

  20. lois commented on Sep 22

    i think it is time the the average american people get a break. thanks walmart. if you do this you will have me as a customer for life. good job.

  21. Bush Rove Lies! commented on Sep 23

    Total election scam. Scare tactics are old and BORING, think Gestalt.
    Remember the CAFTA push? Intending to cut the central and south american trade “partners” from producing generics in order to increase revenues for pharma? What a last minute change of heart? Ask a senior “citizen” about their current prescription plan. Hell, my family is middle class and we can’t afford health insurance, I’m ashamed to admit.

  22. Kenton commented on Sep 23

    Walmart has publicly declared their intention to sell these generics at $4.00. If they decide to back out, it will have a great impact on their future profits as a whole(not just the pharmeceuticals). I could not qualify for medical insurance since I was 22 years old. I have been paying on the average of $600.00 per month on medications. Whether it be a political move or just plain old concern for well being of the public, Walmart will have my trust as long as they abide by their word.

  23. merritt commented on Sep 23

    I am a pharmacist and I applaud the walmart decision.
    Greece has a national prescription plan which allows any item to cost $8-$10 per week for the most expensive items. This is essentially cost for many items. The great point for the wallmart plan is that the government social security money should not be paying for a 300% markup to drug manufacturers on the backs of our retired patients. Most pharmacists get paid a hourly wage and they don’t care what the meds cost. The is a wonderful plan to help patients.
    I have finally heard something good that wallmart has done for our social networking system.

  24. The Big Picture commented on Sep 23

    Barron’s Picks Up Wal-Mart Prescription Drug discussion

    Our commentary Thursday on WalMart’s thrust into the drugstore business (What Does Wal-Mart’s Prescription Drug Plan Mean?) got a nice mention in Barron’s today:WAL-MART DROPPED THE BOMB last week. It wasn’t exactly a nuclear number, except if you happ…

  25. mforbes commented on Sep 25

    Will be interesting to see how this impacts CVS and WAG. Service at these pharmacies is better than it is at WMT and I see CVS and WMT more aggressively informing patients about Part-D. Personally, I’d much rather go to a CVS or WAG than to WMT for a prescription. The question is, how this all affects CVS/WAG. Can they lower prices also? Might they actually bring in MORE customs if they follow WMT’s lead? Or, is WMT going to slowly suck the life out of the prescript business these companies are built on – about 70% of revenues. I guess we wait for the next conf. call.

  26. Michael Walls commented on Sep 27

    I don’t know what all the brouhaha is about. Many people on low or fixed incomes and no health insurance will now have a chance to buy medicine they need and eat too. I remember when asthma inhailers were $15 or $20. Now they are $150.00. Ridiculous!

    The drug industry runs ads for Nexium – go ahead and eat all the tacos you want, just take our pill first. They cost $150.00 a month – or $5 a day. Just leave off the hot sauce and you’ll have 5 more dollars for tacos.

    Since aids has been previously mentioned, what about herpes? Why would they cure it when they make billions treating it.

    Our government is bought and paid for – they won’t do anything for us. Anybody defending the pharmaceutical industry should be dragged out in the street and stoned. Okay already, just give ’em the finger!

  27. dan commented on Sep 30

    In the pharmacy industry, usually the government has rules that say they have to get the best prices possible, ala you can’t use coupons with medicare/medicaid rxs (read the fine print). I would guess that very soon all insurances and govt agencies will be knocking on Sam’s door saying “if you can sell XXX for $4, I want the same price…or better”. When that happens (and it will) the margin will be so thin I will hope that all my walmart stock is sold by then. In other words, short term good (publicity, sales), long term bad (margin, backlash if they have to discontinue, alter, etc.) Also note that no Plavix, Zocor, Pravachol or other what you would consider expensive generics are on the list.

  28. Lily commented on Oct 2

    For a discount on brand and generic drugs, take a look at the prescription plan at http://www.rxdrugcard.com. For only $4.50 a month membership fee you can get the discounted prices shown on their website. Check it out!

  29. William cravens commented on Oct 5

    How would you like to get fifty to eighty miles to a gallon of gasoline ? it is possable and easy IF THE E P A would allow it
    it is a simple process and cheap and can be out on any vehicle that uses gasoline presently we dump a lot of gasoline into the engine that it does not use so they added a catalitic converter to burn it nothing on the automobile is changed or removed you simply heat the gasoline turning it into a vapor Liguid gasoline will not explode so any raw gasoline that does not vaporize in the engine is wasted with a vaporizer there is no waste all milage isn’t it wonderfull you should read the EPA letter and learn how they prevent its use sorry there isn’t enough space or time here to include the letter E mail me if you like

  30. Barb commented on Oct 6

    This is all well and good. Our seniors need a break. But what about the donut hole (the gap). When a senior gets a named brand high dollar prescription, the donut hole is reached rapidly. What happens in that case. Is Wal-Mart going to offer a real plan D to include the named brand for 20 to 50 dollars in their plan. Are the generics going to go through the gap?Also is the plan going to require a premium? In my research, Humana is the only one around that offers a ” no gap” in their complete plan D, but the premiums are very expensive.

  31. Peggy commented on Oct 7

    I just started Part D and went with Humana. I chose the higher premium with no deductible – about $12/month. Not that expensive.

  32. Jack Lobdell commented on Oct 19

    When is Washington going to get out of the drug companys pockets

  33. tom clarke commented on Oct 26

    Good job Wal-Mart, I can’t wait til you have doctors in your stores. Great innovative ideas.

  34. Joan Boisse commented on Oct 26

    How do I know if my meds will be in the plan? It sounds like the wall-mart plan will be a better buy then the prescription drug part d plan the government is offering. Guess the US representives and Senators should lisen up and notice.

  35. rossygranny commented on Nov 29

    So you are finally coming to Wisconsin-Yippee-We olsters need not pay through the nose for drugs we cannot afford but need-Go wal-Mart go.

  36. kristine wilton commented on Mar 8

    I do live in florida and about to lose my health insurance the end of this month for 1 year. I do have asthma and possibly lupus. What walmart has done for me is they have practically gave the medicine to me. Alot of my medicines I could not afford to buy, so then I would have to go without. Is this wise for a asthmatic to go without lifesaving meds? So this plan gets me the meds that I need to survive. I think what walmart has done is a wonderful thing. I don’t have to worry about how I’m going to get the medicine anymore, I just go to walmart and that’s something I can afford! 🙂

  37. betty merchant commented on Mar 20

    thanks i am one of those people without a job my age is 54 and i do not have insurance and trying to get on disability i have 3 bloodclots in my leg and high blood and sius problems and depression so thank you for a break can not get my med. i found out this is a way i can

  38. kristine wilton commented on Mar 20

    I’m thinking walmart should also start a prescription plan for drugs not covered by this plan and charge a monthly premium so it would benefit everyone, the elderly and the poor. We all need these medicines, and I hate like anything that I’m so dependent on some of these drugs for the sake of my very own life. I have had asthma since birth…I’m 36 years old now, with severe asthma, and on many occasions my life has been spared by medicines. And I do think the epipen should be included on this list, since this is a lifesaving emergency medicine. And seconds make all the difference between life and death! This is something nobody with asthma/allergies should go without! And these shots cost $80.00 for two emergency shots, how many people on social security or the poor can afford that everytime they need more shots.

  39. luke commented on Sep 7

    No one answered my unasked question:
    WalMart is, as we all know, pure evil…
    So, ultimately, what does this (crooked?) pharmaceutical lure mean for Americans in general? Walmart has already given us the abandoned parking lot, the non-union bagger, and the near extinction of the small business. What’s next?

  40. gary commented on Sep 17

    kristine….yes i suppose walmart would be pure evil to self loathing socialists who hate the free enterprise system.

    non union?…that’s a good thing.

    how does the prescription plan help the general public?….by saving a lot of them a lot of money ..duh…[see testimonials from some folks on this page.]

    extinction of the small business?…well cant argue there…the times do change and walmart has put some out of business just as walgreens/rite aid etc have closed up most of the mom and pop drug stores as has kroger killed a lot of little groceries as has lowes/home depot done to hardware stores etc etc…walmart just gets the worst name….all the while creating tens of thousands of jobs for people with little or few skills.

    get your prescriptiions filled there and maybe you can afford some new birkenstocks kris.

  41. Stan commented on Jan 8

    Guess what this is going to do to the struggling independent pharmacist, what few are left, who’s annual net profits average about 2% of sales?

    Goodbye friendly pharmacist, quick service, home delivery, hometown folks you know and trust.

    Hello 4 hour waits, long lines, no delivery, no charge account, no smiles, from employees worked to death.

    A great change for America thanks to
    a corporation champing at the bits
    and hellbent on ruling this country by proxy.

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