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The company that revolutionized retailing in America has set its sights on the generic drug market. And by all accounts, the marketing war triggered by Wal-Mart's $4 generic drug offer will have a lasting impact on pharmaceutical prices.

Beginning in Tampa, Fla., Wal-Mart has begun selling a 30-day supply of select generic drugs for $4. And the notion proved so potent that the retail behemoth quickly decided to accelerate the rollout, adding a roster of 26 other states to the list where it would start to expand this year while pushing the total number of prescriptions available to 314. The latest states to be added to the list include a slate of southern locales, including Alabama, Georgia and Mississippi. And Wal-Mart officials say that the program will be available nationwide next year.

Wal-Mart has a fearsome reputation in retail circles for being able to turn on a dime when it comes to undercutting the competition. And it showed all its fleet-footed sales powers in Florida as it filled 88,235 of the $4 prescriptions in the first 10 days of the program. Anxious not to be left behind, Target quickly matched its price in Florida and other states while expanding the list of generic drugs that would be available at that price. The list includes standard therapies for everything from asthma to depression to cardiology.

In most cases, the list avoids many of the newly minted generics, where competition has yet to reduce price to a fraction of its original branded sticker. Drugs such as simvastatin, the generic version of the cholesterol-lowering Zocor, will take longer to hit the bargain basement list.

Target also wasn't the only retailer to respond. Smaller outfits like Wegmans Food Markets — which has 71 stores in five states — were compelled to protect their retail turf by cutting costs on a 3-month supply on about 100 generic drugs to $11.99.

Wal-Mart says that even with generic drug prices available for rock-bottom prices, they can make money on the plan. The retailing giant is quick to point out the type of savings that many people can expect. A 30-day supply of the blood-pressure therapy lisinopril, for example, would be available for a savings of $7.98. The diabetes drug metformin could be acquired for a savings of $3.85 and atenolol, a drug pressure med, would cost 80 cents less at Wal-Mart. The $4 price is available to the uninsured and would even likely attract insured customers who currently pay a $10 or $15 co-pay on generics. Multiply that by four or five times for patients on multiple prescriptions and the savings can start to add up.

In recent years, labor groups have harshly criticized Wal-Mart's policy for paying low wages and offering thin benefits. And they were quick to fire new allegations that the drug campaign was part of a larger scheme to distract the public from an employee insurance program that does little to protect workers. Critics also charged that Wal-Mart's list of hundreds of generic drugs includes multiple doses of the same therapeutic, and that actually only 124 distinct meds are available.

"Wal-Mart's announcement does nothing to address the serious healthcare crisis in its own stores and has no plan to help the 775,000 Wal-Mart employees and their families who are cruelly left uninsured," said Paul Blank, campaign director for WakeUpWalMart.com.

But the most bitter response has come from the community pharmacist operating down the street from Wal-Mart.

"Basically, Wal-Mart's engaged in a bait-and-switch," said Charlie Sewell, senior vice president of the National Community Pharmacists Association (NCPA), which represents Main Street pharmacies. But the actual financial fallout has been limited so far by the narrow range of compounds that are actually represented on Wal-Mart's list of generic specials. "Ninety-nine times out of 100, people are going to be turned away or sadly disappointed. This is just a ploy to build foot traffic."

The NCPA, though, isn't just going to turn a blind eye to the competition either. According to the most recent research available, says Sewell, the average price for dispensing even an older generic drug is $9.62. "So you can see with the $4 price including the cost of the drug, there's no way they're covering their cost."

In the past, adds Sewell, that kind of predatory pricing practice "has left Main Street America littered with the corpses of small businesses." And pharmacists are going to keep a close eye on whether Wal-Mart expands the discount drug program into another killer marketing effort with its cross hairs centered on local pharmacies.

But Wal-Mart — no stranger to criticism — was clearly basking in the rare sun of supportive media attention for doing something that it does best: rolling back prices.

"Each day in our pharmacies, we see customers struggle with the cost of prescription drugs," said Wal-Mart CEO H. Lee Scott, Jr. Cutting drug prices, he adds, is "a real solution for our nation's working families."Even politicians applauded.

"Fifty bucks for a year's supply of prescription drugs is a pretty darn good deal for consumers," said U.S. Senator Bill Nelson (D-FL), an outspoken proponent of giving people access to lower-cost prescriptions. "Because Wal-Mart has the ability to shape the market, maybe other retailers will follow suit."



December 2006

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