Wal-Mart's $4 Prescription for Defeating Unaffordable Drugs
Thursday, September 21, 2006SUSIE GHARIB: Wal-Mart said today it has a remedy for high drug prices. It plans to cut the price of hundreds of generic drugs to just $4 per prescription. The program begins tomorrow at a limited number of Wal-Mart stores in Florida. As Jeff Yastine reports, the program is already giving headaches to pharmaceutical companies and major drugstore chains.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Wal-Mart, it was a simple announcement, but one with blockbuster repercussions.
BILL SIMON, EXECUTIVE VP, PROFESSIONAL SVCS. DIV., WAL-MART: I`m pleased to announce that starting today, Wal-Mart will be selling 291 generic prescription medications for only $4, $4 per prescription.
YASTINE: The specifics of Wal-Mart`s plan: $4 per prescription for a 30-day supply for people with insurance and those without coverage. The retailer is starting the program in its Tampa area stores, but will expand to more states next year. Also, the orders have to be made online and then picked up in-store. Executives said the idea for $4 prescriptions came from an earlier in-house program to provide $3 co-pays for Wal-Mart workers.
SIMON: I went back to our pharmacy team and challenged them to come up with a program that could bring a similar level of savings to our customers, as well as our associates. And we went through the analysis, the costing that we do best and came up with $4.
YASTINE: Consumer groups applauded the plan.
BILL VAUGHAN, SENIOR POLICY ANALYST, CONSUMERS UNION: Generics are very, very, very cheap to produce, like pennies a pill and these companies, if they can get people into their store to shop and offer a good deal on generics, it`s good for everybody.
YASTINE: The announcement also roiled the stock prices of generic drug wholesalers like Cardinal Health and McKesson, as well as pharmacy competitors like Walgreens and CVS. But analysts believe that reaction was overblown.
JOSEPH AGNESE, EQUITY ANALYST, STANDARD & POOR`S: I think this is maybe more of a defensive move by Wal-Mart and I don`t see the large drug store chains reacting at least initially to this initial pilot program from Wal-Mart. They`ll probably take a wait and see approach toward next year and thereafter as Wal-Mart maybe rolls this out across the country.
YASTINE: Wal-Mart says the generic drugs in the plan are not being used as loss leaders to get customers into stores. As executives put it, they`re simply taking the retailer`s greatest strength, driving down costs and applying that to the health care business. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.
