Wal-Mart Uses Retail Muscle to Cut Drug Prices

Retail giant Wal-Mart recently announced a new prescription-drug program that it says could be a shot in the arm for an ailing health-care industry. The chain store will offer dozens of generic drugs at reduced prices, filling some prescriptions for as little as $4. Host Farai Chideya talks with Bill Simon, an executive vice president at Wal-Mart.

FARAI CHIDEYA, host:

From NPR News, this is NEWS & NOTES. I'm Farai Chideya.

We've all heard prescription drug horror stories. Senior citizens choosing between eating and buying badly needed medicine or uninsured people who can't get the drugs because they cost too much. Now retail giant Wal-Mart has announced a new prescription drug program that speaks to those needs. The chain store will offer dozens of generic drugs at reduced prices, filling some prescriptions for as little as $4.

Bill Simon is executive vice president of the Professional Services Division for Wal-Mart. Good to have you with us.

Mr. BILL SIMON (Executive Vice President, Professional Services Division, Wal-Mart): Thank you.

CHIDEYA: So this pilot program was just launched in Florida. It's available to both insured and uninsured consumers and it covers generic medicines for things like allergies, cholesterol, blood pressure medication and diabetes. How many drugs are we talking about and for how long is each supply?

Mr. SIMON: The program is for a 30-day supply, as commonly prescribed by a physician. For dosages that are less than that, for antibiotics for example, it's for the full course of the antibiotics. The drugs that are on the list represent 292 now. We've added to it prescriptions that are made up of different compounds and different doses.

CHIDEYA: So who are you targeting and how will the program ultimately benefit the consumer?

Mr. SIMON: Well, for us this is Wal-Mart in healthcare. This is our business model, getting the products at the lowest possible cost, moving them as efficiently as we can and then passing that savings onto our customers, who, in the case of health care, are in desperate need of a break in price.

CHIDEYA: Is the company going to take a loss on any of these drugs?

Mr. SIMON: No. All these products are above-cost products for us. And we're moving them and using the strength of Wal-Mart as a company in our logistics and operations area and we're passing that savings through to the customer.

CHIDEYA: Some critics of Wal-Mart have said that workers have to turn to state-funded healthcare programs such as Medicaid because the wages and benefits are insufficient. Are you going to expect that some of your own employees might be using this program?

Mr. SIMON: We would encourage anybody to use the program. It's an excellent deal. It's $4 for a prescription, and that is available to insured and uninsured. So we would certainly make that available and expect and hope our associates would take advantage of it.

CHIDEYA: How important is the pharmacy business to what you do, because Wal-Mart carries just about everything?

Mr. SIMON: Pharmacy, for us, is a critical piece of the business. It is a service that we can offer our customers and a way that we can help improve their lives.

CHIDEYA: Why did Wal-Mart pick the Tampa Bay area to launch this program?

Mr. SIMON: It's a market where there's a need. While there's needs in many markets around the country, with the higher density of senior citizens and hardworking families as well as uninsured we thought it was a great spot to kick it up.

CHIDEYA: Now last week your competitor, Target, said it's going to match Wal-Mart's generic drug prices in the Tampa Bay area. What kind of competition are we ultimately talking about here? How are you going to out-do Target? Are you going to eventually cut your prices again and maybe incur some losses?

Mr. SIMON: We welcome Target to the play. I think it's a wonderful thing for them to pass savings on to their customers as well. Healthier Americans is a good thing.

CHIDEYA: This is - this may not be a question that you are prepared to answer, but could a program like this discourage enrollment in the Medicare prescription drug benefit? I'm assuming that a $4 prescription is probably lower than what's actually offered in that plan.

Mr. SIMON: That would be speculation. But it would seem that it would actually enhance the program. One of the biggest issues with the program is that when senior citizens reach that coverage gap that's being called the donut hole they have to sort of revert to a hundred percent payment for their prescription drugs, and that's a major burden on them. In fact, a lot of them are heading to that point now. So I would think this would be a very, very strong compliment. As well at $4, it will keep them out of that coverage gap.

CHIDEYA: I guess, finally, Wal-Mart has been criticized for, you know, giving mom and pop stores almost no chance of survival when you can get something so much cheaper from a big-box retailer. How have you been interacting with communities around issues like your pricing and issues of how that affects their communities?

Mr. SIMON: In this particular case, every community leader and group that we've spoken with has been very, very excited about the opportunity to bring their community to these drug prices, and so we've been very warmly received by everyone involved. Because it does really bring a cost savings to people who really need that advantage right now.

CHIDEYA: Bill Simon, executive vice president of the Professional Services Division for Wal-Mart, we thank you for joining us.

Mr. SIMON: Thank you.

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