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2006 September 24 Sunday
Wal-Mart Offers $4 Prescriptions On 300 Generic Drugs

Wal-Mart's new price for a one month supply of a few hundred generics is less than for some over-the-counter drugs.

Retailing giant Wal-Mart Stores Inc., known for forcing prices down to dominate nearly every market it enters, said yesterday that it would sell nearly 300 generic drugs for $4 per prescription, whether or not a customer has insurance.

Using its might as the nation's largest retailer and its legendary ability to force suppliers to cut prices to the bone, the company will begin the $4 price program in its 65 stores in the Tampa area today, in all of Florida in January, and in as many other states as possible by the end of 2007. The $4 is for a typical monthly supply of medicine, and included on the Wal-Mart list are generic versions of many popular prescription drugs, including the antibiotic amoxicillin and the heart and blood-pressure treatment lisinopril, sold under the brand names Prinivil and Zestril.

Wal-Mart might be doing this as a loss leader They aren't going to discount most generics or drugs that are still under patent. People who get all their prescriptions filled at once will pay for non-discount drugs as well. Plus, Wal-Mart gets people to walk all the way to the back of their stores to get the prescriptions. So they can sell people as they pass through other departments.

If you want to see the list of drugs go to the Wal-Mart press release and then page down to the bottom where you'll see a "List of available $4 generic drugs" which is a pop-up to select a PDF file to view or download. You'll need Adobe Acrobat Reader (a free download) to view the list.

Shares of generic drug makers took hits in the stock market.

Shares of generic-drugmaker stocks also sank on Sept. 21. Barr Pharmaceuticals (BRL) lost 1.1%, to trade at $51.95 per share, Watson Pharmaceuticals (WPI) fell 1.4%, to $26.22, and Mylan Laboratories (MYL) declined by 2%, to $20.15. Dr. Reddy's Laboratories (RDY) edged slightly lower, to $16.24 per share.

"Although this program, if spread nationwide, would exert pressure on generic pricing trends, we think its overall impact would likely be limited, since it would probably affect less than 20% of all generic drugs sold, and impact mostly older, already deeply discounted products," says S&P equity analyst Herman Saftlas.

Wal-Mart gets absolutely great publicity from this move.

Target quickly said "me too".

Quickest on the draw after Wal-Mart's bombshell was Target Inc., which announced early Friday that it would match Wal-Mart's dramatic price cuts at all its pharmacies in the Tampa Bay area, including Sarasota and Manatee counties.

That is the precise battleground that Wal-Mart established this week for its rollout.

If you use prescription drugs do not assume just because Wal-Mart is cheap on these 300 that it will be cheapest on other drugs. Shop around. Use the internet to compare prices.

Expect more uniform drug pricing as a result.

"I think you're going to see very simplified pricing for generics in most places now," said Richard D. Hastings, an analyst with New York-based Bernard Sands. "You're not going to be seeing $10 here and $16 there and $20 over there" for the same generic drug -- a pricing spread that frequently occurs now.

Although the pilot program, involving mostly heart, diabetes and asthma medications, will be limited initially to the Tampa, Fla. area, Wal-Mart officials say they plan to expand to "as many states as possible" next year.

These are older generics and so do not include some of the better newer generic drugs.

"It is not as significant as it first seems, in our opinion," Joseph Agnese, an analyst at Standard & Poors, told the Times.

Most of the drugs on Wal-Mart's list are older generics that are relatively inexpensive already, Stephen Schondelmeyer, professor of pharmaceutical economics at the University of Minnesota, told the Chicago Tribune.

But this will exert pricing pressure on some of the generics which are not on Wal-Mart's list.

Every year more drug patents expire and the drugs go generic. The size of the super cheap list will probably expand beyond this initial 300. At such low prices a lot of health plans are going to push the cheapest drugs on their patients.

Share |      By Randall Parker at 2006 September 24 06:43 PM  Economics Health


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