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Published: Wednesday, 9/27/2006

Wal-Mart's prescription

WAL-MART'S dramatic announcement that it will start selling hundreds of generic prescription drugs for $4 a prescription, even if the purchaser has no insurance, has the potential to shatter high prices that have forced many Americans, particularly the elderly, to make a most difficult choice: food or medicine.

Just as the giant retailer has transformed the shopping scene in thousands of towns around the country with its superstores, luring customers with its array of products and low prices - often at the expense of existing businesses - so it has the potential to drive down drug prices and offer stiff competition to existing pharmacy chains.

Initial evidence of this announcement's impact was a sharp drop that day in the share prices of Walgreen Co., and CVS Corp., which fell by approximately 7 percent and 8 percent respectively. And Target Inc., said it would match the prescription price in the Tampa area, where the program is starting, as part of its goal of remaining price-competitive.

How long will it be before other pharmacies and drug chains have to drop their prices or risk losing business to Wal-Mart? Not long, we imagine.

The Wal-Mart program, which covers almost 300 generic drugs, will expand throughout Florida in January, and to other states by the end of next year.

There is some fine print to this innovative program. It covers generics for such much-used drugs as the antibiotic amoxicillin, and lisinopril, a heart and blood pressure medication sold as Prinivil and Zestril. It does not cover hydrocodone, better known by its brand name Vicodin, or Xanax, an anti-anxiety drug, for example.

But if the program is successful it won't be long before the generics of other high-use medications fall under the program, too. The $4 figure will cover a typical month's supply of a generic drug.

It's significant, too, that Wal-Mart is opening this program to all consumers, whether they are covered by insurance or not. Those with the Medicare Part D drug benefit may not see dramatic savings because many Medicare plans offer generics for nominal amounts.

Nevertheless, this could be, as a Wal-Mart executive suggested, "real savings for working families."

The Generic Pharmaceutical Association says 8,400 of 11,167 drugs listed by the Food and Drug Administration are sold generically, and the average price of a generic in 2004 was $28.71 for a month's supply, compared with $95.54 for a brand name.

Wal-Mart surely isn't taking this action out of pure altruism and concern for the well-being of the nation's poor or seniors. Cheap prescription drugs are "not a loss leader," a spokesman said. Perhaps, but they are certain to increase traffic for the retailer, boosting sales of other products.

The happy corollary of this move is that it will be a catalyst for rethinking how drugs are priced. And it's not only seniors and the poor who will gain from that.

As the program rolls out across the country, it will be particularly interesting to see what happens in this part of Ohio and in southern Michigan, where people are crossing to Canada for cheaper brand-name prescription drugs. Why go to Windsor, Ont., if a similar or better price can be obtained at a local store?

Drug costs rose more than 11 percent between 2000 and 2004, almost five times the rate of inflation. Those increases hammer families on limited incomes.

Wal-Mart's plan, business-driven and a social service, will likely earn the company public kudos to offset criticism that it does not adequately remunerate or insure its own workers.

The company's size, reach, and economic clout ensure that this initiative will have repercussions for consumers, retailers, and manufacturers, some good, some bad - as with nearly everything this giant retailer does.



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