Wal-Mart Expanding Discount Drug Program

Wal-Mart is adding a couple of dozen prescription medications to its $4-per-month drug plan as part of an effort by the retailer to make inroads into how health care is delivered.

Wal-Mart started its plan a year ago, offering a short list of generic drugs at a special $4-per-month price. The company recently implemented the program at all of its drugstores after test-piloting it at some of its Florida pharmacies.

And with this new move, the company is going even further with its drug offerings, says Wal-Mart senior vice president John Agwunobi — a former assistant secretary for health for the federal government.

"We're adding medicines for glaucoma, for attention deficit disorder. We're adding medication for fungal infections and for acne. We're also adding medicines for fertility and prescription birth control," Agwunobi says.

The fertility and birth control medications will go for $9 a month, not the regular $4.

For some people whose generic drugs only cost $5 or $10, the savings aren't that great. But there are big savings for certain drugs, especially those that have recently become available as generics.

Agwunobi says that in the first year alone, Wal-Mart expects the program to save patients about $610 million in prescription costs.

Competitive Pricing

Pharmacies have always had a bigger percentage of profit on generic drugs as compared to brand-name drugs, so there's room for some price cutting. And Wal-Mart has been able to drive big bargains with drug companies. Agwunobi says that Wal-Mart will still make money on the $4 prescriptions.

Health economist Stuart Altman, of Brandeis University, says the move won't hurt the big chain drug stores, like CVS and Walgreens.

"They have the ability to counter this if they choose," Altman says.

In fact, many of the big chains followed Wal-Mart last year and started offering their own discounts. Yesterday, Target announced it will match Wal-Mart's new prices.

But Wal-Mart's move will hurt the smaller pharmacies, Altman says.

Taking on Health Care

And there's another group that should worry, says Princeton University economist Uwe Reinhardt.

"If I were a brand-name producing, research-oriented company, I would worry about it," says Reinhardt. "Here you have a great free enterpriser teaching Americans that generics are just as good as brand-name drugs."

Wal-Mart has been getting more involved in health care, after taking a public relations beating for offering only meager health insurance to its employees. Recently, it expanded the options. And for consumers, it's opened on-site medical clinics at some of its stores — and plans to open hundreds more.

Reinhardt says the company may be taking aim at the entire health-care system.

"I think it's a really fascinating way to come out of the corner and really slug the system. At the moment, the body blows don't hurt. But they add up. I'm watching this with great fascination, and expect more from them," Reinhardt says.

Following Wal-Mart's announcement yesterday, the price of the company's shares rose slightly.

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