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Published: December, 2006; Vol 3, Num 7

After the Hype:

Wal-Mart’s New Drug Program is Nothing Special

In a move calculated to generate maximum publicity, Wal-Mart chose Florida and its large concentration of senior citizens as the audience for its announcement of a new $4 prescription drug program earlier this fall.

The plan worked beyond Wal-Mart’s expectations. In a clear sign of how desperate consumers are to find an alternative to the soaring cost of medications, Wal-Mart claimed to have filled more than 88,000 new prescriptions in the first ten days of the program. That vast expression of interest generated nationwide publicity for Wal-Mart which, in turn, announced plans to expand immediately to 37 more states.

Clearly, Wal-Mart knows how to market and advertise, but how important is the new program?

Well, it turns out – as the dust begins to settle – that it is far more hype than substance. Let’s take a look.

Special?

Is the Wal-Mart program groundbreaking? Not really. Kmart has had a similar program in place since early this year, beating Wal-Mart out of the gate by more than six months. Apparently, however, the marketing agents for Kmart chose not to hype their program, perhaps because they understood its overall limitations. Instead, Kmart announced that it would provide 90-day supplies of a limited number of prescription drugs for $15. For those with prescriptions on the list, the Kmart program provided an attractive, low price and the convenience of a once-every-90-day pick-up.

When Wal-Mart announced its program, it undercut Kmart’s price slightly, offering 30-day supplies of the drugs on its list for only $4. However, by requiring customers to purchase in 30-day supplies, Wal-Mart ensured that its customers would visit the store three times more often than Kmart customers, thus likely enticing additional sales of Wal-Mart products. Kmart quickly responded that it would provide 30-day supplies for $5, for those customers who wanted to buy more frequently in smaller quantities.

Thus, while Wal-Mart managed to generate maximum publicity for its program, it was not the first in the field. Nor will it be the last. Since the Wal-Mart announcement, Target joined the competition, first saying it would match Wal-Mart’s prices in all states where the two companies compete and then going a step further to say it would offer its program in all Target pharmacies nationwide. Not to be outdone, other chains have begun trotting out generic drug discounts of their own.

$4 Lure

As more and more companies have entered the competition to attract customers with discounted generic drug prices, experts have looked more closely at the available products. This is where all the new programs break down. Few of the most commonly prescribed medications and dosages are on the list. Moreover, the list is subject to constant modification.

In the United States, the Food and Drug Administration (FDA) has approved 11,487 brand-name and 8,730 generic drugs for sale. However, of these, Wal-Mart offers only 143 different generic drugs (no brand-names). Because some of the drugs are offered in different dosages, Wal-Mart currently claims a total of 331 generic offerings.

However, some drugs on the list – antibiotics, for instance – are frequently prescribed in less than 30-day amounts (10 days is common), so for some customers, their inclusion on the list is mere padding.

Similarly, for many customers, the dosage offered may not be appropriate. While offering less than two percent of all generics available on the market, Wal-Mart offers an even smaller percentage of the dosages that patients may require. For instance, the lone cholesterol medication on the Wal-Mart list – lovastatin – is offered only in a 10 milligram dosage. However, many patients who use lovastatin require different dosages. These are not available at the $4 price.

Also, a number of the drugs on the Wal-Mart list are older medications that are less frequently prescribed these days, as newer medications have pushed them aside. Lovastatin is a good example. First introduced almost 20 years ago, it is the oldest statin (cholesterol-lowering medication) on the market.

Summary

Amid the initial fanfare surrounding the program, some commentators suggested Wal-Mart’s program might prove a real service to health care consumers. It now appears that it was little more than an advertising ploy to draw more customers into the stores.