business news in context, analysis with attitude

The New York Times reports that while Wal-Mart is trumpeting its new plan to cut the cost of generic drugs to $4 as applying to 300 drugs, a close examination of the program actually “includes only about 124 separate medicines in various dosages, like 12 versions of the popular antibiotic amoxicillin. It leaves out some popular drugs altogether, like the generic version of the cholesterol-lowering treatment Zocor.” In addition, the paper points out, Wal-Mart has carefully chosen which drugs it will cover — 300 out of roughly 11,000 generic drugs available.”

And, according to the Times, “while uninsured people should benefit from the program, those with insurance may save only a dollar or so, making a trip to Wal-Mart not worth their while, analysts said. In Florida, where the program will have its debut, most people on Medicaid pay nothing and may have little incentive to shop around for cheaper prescription drugs.”

Furthermore, CVS said Friday that the 300 drugs listed by Wal-Mart already are low-cost in its stores that emphasized that they represent less than 0.5 percent of its pharmacy sales.

And Kmart argued that it has long has a $5 generic drug plan that actually is a better deal for consumers because it offers a 90-day supply of selected generic drugs for $15, while the Wal-Mart plan forces customers to come in once a month, thereby spending more on gasoline to make the trip. Kmart also noted that its program is offered at 1,100 pharmacies around the country, while the Wal-Mart program actually is just a test that is available in 65 stores.

Target said last week that it will match the Wal-Mart plan.

The Times notes that Wal-Mart has attacked the cost of generic drugs in much the same way as it has lowered prices in other categories – it has cut out third-part distributors, sourcing the products directly from drug manufacturers and introducing “rapid, automated machines into its pharmacy distribution centers that had long relied on workers to fill orders. In doing so, Wal-Mart reduced the amount of time that costly drugs sat in warehouses, rather than on store shelves where they could create revenue.”

Meanwhile, Wal-Mart’s increased focus on health care issues was seen last week when SmartCare Family Medical Centers, a Colorado-based company, announced a deal that will have it opening a “significant” number of medical clinics inside Wal-Mart stores that will offer vaccines, flu shots and other basic treatments offered by nurse practitioners.
KC's View:
Let the games begin.

If there was any doubt that health care was going to be a major battleground for retailers in the coming years, it all has been erased now. Everybody is going to be looking for an angle that nobody else has…and the results might have the effect of fixing some of the problems with the nation’s health care system.