Wal-Mart Stores on Thursday announced a pilot program in Florida to sell 30-day prescriptions of some generic medications for $4, a move that could "prompt a price war with other pharmacies," USA Today reports. The program will cover about 150 products, including treatments for high blood pressure, infection and diabetes (Appleby, USA Today, 9/22). The new prices will be tested initially at 65 Wal-Mart, Sam's Club and Neighborhood Market pharmacies in the Tampa, Fla., area and are expected to take effect statewide in early 2007. Depending on the response, the company plans to expand the program to most states (Albright/Hundley, St. Petersburg Times, 9/22). The program includes some popular generic drugs, such as the antibiotic amoxicillin and the heart and blood-pressure treatment lisinopril, sold under the brand names of Prinivil and Zestril, respectively, the Washington Post reports. The list of drugs does not include generic versions of other popular drugs, such as painkillers Vicodin and Darvon and the anti-anxiety drug Xanax (Day, Washington Post, 9/22). USA Today reports that the drugs included in the program have been available generically for a relatively long period, have multiple manufacturers and are "already inexpensive" on the wholesale drug market. In addition, large companies can purchase the medications in bulk for less than the $4 cost, according to USA Today (USA Today, 9/22). Wal-Mart plans to add generic versions of additional popular drugs, such as cholesterol drug Zocor, to the program, company Executive Vice President Bill Simon said. The drugs that Wal-Mart will sell for $4 have been discounted an average of 20%, and savings on some drugs will be "considerable," the Wall Street Journal reports. For example, Wal-Mart will charge $4 for 850 milligrams of diabetes treatment metformin, compared with $17.72 at other Florida Wal-Mart stores and $28.29 at Walgreen. However, a $4 prescription for blood-pressure drug atenolol is still more expensive than Costco's list price of $3.69, the Journal reports (McWilliams/Martinez, Wall Street Journal, 9/22).
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Simon said Wal-Mart is working with generic drug makers to improve their efficiency. "We are working with them as partners," Simon said, adding, "We are not pressuring them to reduce prices." Simon said Wal-Mart is able to reduce its generic drug prices "by using one of our greatest strengths as a company: our business model and our ability to drive costs out of the system, and the model that passes those costs savings to our customers" (D'Innocenzio, AP/South Florida Sun-Sentinel, 9/21). The St. Petersburg Times reports that the program "is expected to be particularly attractive to the uninsured." In addition, some people with drug coverage might choose to pay out-of-pocket if Wal-Mart's prices are lower than their copayments. Wal-Mart Regional Vice President Ronny Hayes said the Tampa area was chosen for the pilot program because of its large population of seniors, moderate-income working families and uninsured people (St. Petersburg Times, 9/22).
Reaction
CMS Administrator Mark McClellan said he did not think the Wal-Mart program would discourage enrollment in the Medicare prescription drug benefit. "Remember that the drug plans in Medicare already provide excellent coverage for generics," McClellan said, adding, "Many of the plans have generics for a dollar or two, or even free" (Washington Post, 9/22). Florida Gov. Jeb Bush (R) said, "This act of good corporate citizenship will help consumers manage health care costs." Sen. Bill Nelson (D-Fla.) said, "Because Wal-Mart has the ability to shape the market, maybe other retailers will follow suit." John Ransom, an analyst with Raymond James & Associates, said, "There's clearly a price war for the cash-paying customer. But 95% of a retail drugstore's pharmacy business is people with $5 or $10 insurance copays. And this may not be enough to get the insured patient to switch" (St. Petersburg Times, 9/22). Analyst Ed Kaplan of Segal said, "Customers who take five or seven medications a month and can save $10 on each might switch" to Wal-Mart. Devon Herrick, an economist at the National Center for Policy Analysis, said, "That's a great price for a 30-day supply of drugs and will be a tremendous boon for seniors" (USA Today, 9/22). Richard Hastings, a retail analyst at Bernard Sands, said retailers most likely to be negatively impacted by Wal-Mart's program are "smaller prescription drug buyers, including certain supermarket chains that offer pharmacy services" (Wall Street Journal, 9/22).
Target Announces Price Cut
In related news, Target on Thursday night announced that it would match Wal-Mart's generic drug prices in the Tampa area, the Atlanta Journal-Constitution reports. A Target release said it is the retailer's policy to be price-competitive with Wal-Mart (Bond, Atlanta Journal-Constitution, 9/22). Walgreen, the nation's largest retail drug chain, said it does not plan to match Wal-Mart's generic drug prices (St. Petersburg Times, 9/22). Walgreen spokesperson Michael Polzin said, "I don't think the price change for a lot of these [drugs] is that much" (Wall Street Journal, 9/22).
Broadcast Coverage
Several broadcast programs reported on the Wal-Mart announcement: APM's "Marketplace": The segment includes comments from John Rector, senior vice president of government affairs and general counsel for the National Community Pharmacists Association; Steve Schondelmeyer, professor of pharmaceutical economics at the University of Minnesota; and Bill Simon, executive vice president of Wal-Mart's Professional Services Division (Palmer, "Marketplace," APM, 9/21). The complete transcript and audio of the segment in RealPlayer are available online.
CBS' "Evening News": The segment includes comments from Peter Lurie, deputy director of the Health Research Group at Public Citizen; David Maris, an analyst at Banc of America Securities; Lee Scott, CEO of Wal-Mart; Simon; and U.S. residents (Mason, "Evening News," CBS, 9/21). The complete segment is available online in RealPlayer.
NBC's "Nightly News": The segment includes comments from Paul Blank of WakeupWalMart; David Certner, legislative policy director for AARP; David Faber of CNBC; Simon; and U.S. residents (Costello, "Nightly News," NBC, 9/21). The complete segment is available online in Windows Media.
NPR's "All Things Considered": The segment includes comments from Kathleen Jaeger, president and CEO of the Generic Pharmaceutical Association; Gail Shearer, director of health policy analysis for Consumers Union; and Simon (Silberner, "All Things Considered," NPR, 9/21). The complete segment is available online in RealPlayer.
PBS' "Nightly Business Report": The segment includes comments from Joseph Agnese, equity analyst for Standard & Poor's; Simon; and Bill Vaughn, senior policy analyst for Consumers Union (Yastine, "Nightly Business Report," PBS, 9/21). The complete transcript of the segment is available online.
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View drug information on Prinivil or Zestril; Zocor.