ABC News said Wal-Mart’s announcement yesterday that it would sell 291 generic drugs at “just $4” per month, meant “lifesaving pills are about to get cheaper.” Wal-Mart said it had chosen crucial ones for common conditions like allergies, high blood pressure and diabetes. “Wal-Mart is taking this step so that our customers and associates can get the medicines that they need at the prices they can afford,” a Wal-Mart Executive Vice President announced. “This program will give them options and access.” It could also be that the move was designed more to improve the ailing image of the company’s weak health care program for its 1.3 million American workers. The generic roll-out in the Tampa Bay, Florida area may, in fact, not be much of a pill to swallow in the first place. For people with health insurance, like the millions of older people on Medicare, who use the most medications, the copay for generic drugs is already less than $4 for most medications on Wal-Mart’s list, so the low price is actually than many seniors would copay on these generics using their Medicare D card. If the total cost charged by Wal-Mart to Medicare was higher than a competitor’s, the senior’s bill would rise faster towards the “donut hole” limit in their Part D plan. The Wal-Mart program is aimed more at people who have no insurance, and are paying for their drugs with cash. As with sales of gasoline at Wal-Mart, the cheap products are designed to drive more consumer traffic into their stores, where they will make more money from consumer impulse buying while they wait for their prescription to be filled — which is why Target matched the generic program the same day. The media began explaining that the profit margin on generic drugs was large enough that Wal-Mart could afford to cut the price. Elderly rights groups have complained for years that they could get the same generics much cheaper in Canada than from a Wal-Mart pharmacist, and that drug makers were profiteering at the expense of people’s health care. Wal-Mart’s latest move to cut generics shows that the cost of these drugs has been enormously over-priced, and that the giant retailer can still make money on the deal as structured. Within a day of Wal-Mart’s announcement, analysts were saying that the new plan would not impact other chain drugstores as much as initially estimated. The 291 drugs covered are actually a small fraction of the thousands of generic drugs sold at pharmacies. The drugs on Wal-Mart’s list are “low-priced, low-profit, and low co-payment already,” one analyst noted, adding that this move by Wal-Mart will not impact the chain’s profitability. Cash customers, those without insurance, are estimated to be a very small part of Wal-Mart’s pharmacy business. Many seniors are coming in with Medicare Part D, and they will see no financial benefit from this offer. Younger, low-income people are not likely to even be seeing a doctor, and thus not using many drugs. A spokesman from Walgreen said Wal-Mart’s plan will not have a significant impact on them, because 95% of Walgreen’s pharmacy patients have insurance coverage, and their copay for the drugs on Wal-Mart’s list would be around $5. “The difference is not enough to change our patients’ behavior,” the Walgreen’s official said. For people on Medicare D, Walgreen’s charges a $3 copay for most of the drugs on Wal-Mart’s generic list — cheaper than Wal-Mart.
The Wal-Mart generic plan will not help those Americans who use prescription drugs the most — the elderly. As more and more seniors join Medicare Part D, the Wal-Mart $4 copayment is not what the doctor ordered. A lot of Wal-Mart customers have no bank accounts, and pay for their products with cash, but drugs may not be a major component of the retailer’s overall cash-carrying customers’ purchases. As more becomes understood about this latest Wal-Mart media show, it appears that the generics plan was designed more to cut down on the negative perception of Wal-Mart as an employer that stints on its own workers’ health coverage. But health care is a major consumer expenditure, and in-store health clinics and drugstores are a growing segment of Wal-Mart’s business. The Wal-Mart generic plan did result, however, in an overdose of mindless publicity in the media.
