[Ip-health] Wal-Mart Cutting Generic Drug Prices in Florida

[Benjamin Krohmal]

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[ Picked text/plain from multipart/alternative ]
Retailer to sell low-priced drugs to workers, customers in test program

MSNBC News Services


NEW YORK - Wal-Mart plans to begin selling nearly 300 generic
prescription drugs for a sharply reduced price, offering a big lure
for bargain-seeking customers and presenting a challenge to competing
pharmacy chains.

The world=E2=80=99s biggest retailer said Thursday that it will test its
sales program, in which 291 generic drugs will be sold at $4 for a
month=E2=80=99s supply, in Florida. The drugs involved provide treatments
for conditions ranging from allergies to high-blood pressure.

Selling generic drugs at prices that don=E2=80=99t offer much if any margin
for profit could serve two purposes for Wal-Mart: It could draw
customers away from big pharmacy chains to Wal-Mart stores that offer
a much wider array of products, and it could help Wal-Mart with an
image problem stemming from its policies on health insurance for
employees.
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=E2=80=9CWe=E2=80=99re able to do this by using one of our greatest strengt=
hs as a
company =E2=80=94 our business model and our ability to drive costs out of
the system, and the model that passes those costs savings to our
customers,=E2=80=9D Bill Simon, executive vice president of the company=E2=
=80=99s
professional services division, said in announcing the plan at a
Tampa, Fla., store. =E2=80=9CIn this case were applying that business model
to health care.=E2=80=9D

Wal-Mart Stores Inc. officials said the reduced price represents a
savings to the customer of up to 70 percent on some drugs. The
average monthly cost for a generic drug prescription is $28.74,
according to the National Association of Chain Drug Stores. For
branded drugs, that figure is $96.01.

Richard Hastings, a retail analyst at Bernard Sands, told CNBC
Thursday that slashing the cost of generic drugs at Wal-Mart would
have a broader economic impact and hurt the retailer=E2=80=99s competitors.

=E2=80=9CThe Wal-Mart effect continues,=E2=80=9D Hastings said. =E2=80=9CTh=
e magnitude
of Wal-Mart is still so gigantic that even incremental moves like
this one will have a profound effect on [its] competition and on the
economy in general,=E2=80=9D he said. He said it is =E2=80=9Cvery likely th=
ere
will be price competition=E2=80=9D as a result of Wal-Mart=E2=80=99s move.

David Maris, an analyst who covers generic companies at Banc of
America Securities, agreed the plan could force down the price of
generic drugs if rolled out nationally.

Shares of pharmacy chains Walgreens and CVS fell on the news.

Critics said the plan was a cover for Wal-Mart=E2=80=99s failure to provide
its employees adequate health care. They contend that the company=E2=80=99s
benefits are too stingy, forcing taxpayers to absorb more of the cost
as the workers lacking coverage turn to state-funded health care
programs.

The program will be launched on Friday at 65 Wal-Mart, Neighborhood
Market and Sams=E2=80=99 Club pharmacies in the Tampa Bay area and will be
expanded to the entire state in January.

Simon wouldn=E2=80=99t be specific about why Florida and specifically the
Tampa Bay area was chosen for the rollout of the initiative, saying
only that there was a need for it here.

The company said it plans to expand the program to as many states as
possible next year.

Simon said the 291 generic drugs include =E2=80=9Cthe most commonly
prescribed drugs for the some of the most common illnesses that face
Americans today, including cardiac disease, asthma, diabetes,
glaucoma, Parkinson=E2=80=99s (disease) and thyroid conditions.=E2=80=9D

Simon wouldn=E2=80=99t give details on how much the plan is expected to cos=
t
Wal-Mart or the company=E2=80=99s dealings with the drug companies involved=
.

The $4 prescriptions are not available by mail order and are being
offered online only if picked up in person in the Tampa Bay area.

In a conference call with reporters, Simon said that the generic
drugs would not be sold at a loss to entice customers into the
stores, a strategy that has been used in Wal-Mart=E2=80=99s toy business.
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He said Wal-Mart is working with drugmakers to help them be more
efficient, but added, =E2=80=9CWe are working with them as partners. We are
not pressuring them to reduce prices.=E2=80=9D

Tampa Wal-Mart pharmacy customer Pat Sullivan praised the company=E2=80=99s
initiative. The retired Massachusetts police officer said $4 generic
prescriptions are a tremendous help.

=E2=80=9CI=E2=80=99m on disability and my benefits run out by the end of th=
e
month,=E2=80=9D he said. =E2=80=9CIt comes down to where do I go for a $100
prescription? I have no outlet other than to break a pill in half and
take half today and half tomorrow.=E2=80=9D

The initiative =E2=80=94 the fourth since last October that Wal-Mart has
moved to improve health benefits =E2=80=94 drew criticism from one of its
most vocal critics, union-backed Wake Up Wal-Mart.

=E2=80=9CWhile lowering prescription drug costs is a good thing, Wal-Mart
cruelly ignores the fact that it fails to provide company health care
to over half of its employees which leaves 46 percent of its workers
children uninsured or on public health care,=E2=80=9D said Chris Kofinis,
spokesman for Wake Up Wal-Mart, in a statement. =E2=80=9CWal-Mart needs to
answer one very simple, but serious question =E2=80=94 why not just improve
the health care coverage of its employees?

Wal-Mart=E2=80=99s recent moves to improve its health care included relaxin=
g
eligibility requirements for its part-time employees who want health
insurance, and extending coverage for the first time to the children
of those employees. Part-time employees, who had to work for Wal-Mart
for two years to qualify, now have to work at the company for one
year. This year, Wal-Mart also expanded a trial run of in-store
clinics, aimed at providing lower cost non-emergency health care to
the public.

Last October, Wal-Mart offered a new lower-premium insurance aimed at
getting more of its work force on company plans.

But critics argue that Wal-Mart=E2=80=99s coverage calls for a deductible
that requires workers to pick up the first $1,000 in medical
expenses, and the deductible rises to a maximum of $3,000 for families.

Wake Up Wal-Mart has called upon Bentonville, Ark.-based Wal-Mart to
offer better health care coverage and higher pay to employees.

This past summer, Wal-Mart won a successful fight against a first-of-
its-kind state law that would have required the retailer to spend
more on employee health care in Maryland. A federal judge ruled in
July that it was invalid under federal law. But other states are
considering similar legislation aimed at the company.


Benjamin Krohmal
Research Associate
Consumer Project on Technology
Tel: +1-202-332-2670 ex. 14
Fax: +1-202-332-2673
ben.krohmal@cptech.org