| For years, Americans have largely been content to pick up their prescription drugs at the big chains like CVS, Eckerd and Walgreen's.
But a new generic drug program that has been swept along by a wave of positive press reports may quickly change all of that.
Wal-Mart parlayed its market-quaking retail power into action by cutting a list of older generic drug prices to $4 for a 30-day supply. Starting in Tampa, the retail giant swiftly announced an expansion into more than 3,000 pharmacies in 37 states, with the rest of the country expected to follow in short order. Close behind, big national discount chains like Target and Kmart announced plans to match or beat the same deal. Within 48 hours of Wal-Mart's November announcement that it was adding another 11 states to its rollout plans, Target had countered that at least some of the $4 generics would be available in all of its 1,287 pharmacies. And a survey indicates that the gravitational pull of those lower prices may well put an end to the longstanding dominance of the big drug chains.
A new Wall Street Journal Online/Harris Interactive Health-Care Poll found that 93 percent of adults get their drugs currently from one of the big drug chains. Only 13 percent ever found themselves in front of the pharmacy counter at a discount store. But half of the adults surveyed said they would likely switch to the discount operations while another 25 percent said it was somewhat likely they would make the change.
The big drugstores' initial response to the Wal-Mart move was to shrug off its impact. CVS noted that the 143 generic drugs in various doses on the list provided half of 1 percent of the money they make from drug sales. Seniors, they said, were already paying close to Wal-Mart's price as co-pay for Medicare. Walgreen's announced it wouldn't match Wal-Mart's prices, relying on the customer loyalty it had built up around the country. And it added that the Wal-Mart program included only about 5 percent of all the generic drugs available.
So far, the big drug stores have had the support of a long slate of Wall Street analysts. William A. Dreher Jr. of Deutsche Bank has forecast only fractional revenue losses for either CVS or Walgreens.
But Wal-Mart says it can already feel the market influence spurred by the campaign. As of November, the retail giant had filled 2.1 million more prescriptions for the pharmacies in the program compared to their sales record from the year before. Customers were paying close attention to the savings they could get from a list of drugs that includes the antibiotic amoxicillin, one of the 10 most prescribed drugs in America. And Wal-Mart says the drugs on its generics list account for one of every four prescriptions it fills.
Generic manufacturers say they aren't promoting any one retailer, but they're clearly pleased to see the price war breaking out in communities all across the country.
"These programs certainly increase the awareness of generics, that's a positive," said Andrea Hofelich, spokesperson for the Generic Pharmaceutical Association. But they're also likely to be restricted to the older generic drugs, where you find as many as seven different generic manufacturers whittling away at prices as they compete for market share. Newer generic drugs, meanwhile, may be limited to a handful or only one manufacturer. And they can command higher wholesale prices than Wal-Mart - even with its legendary market clout - can dictate.
The generic drug market hit $22 billion last year, with more than 8,700 generics on the market. As the list has grown, payers have also been pressing consumers to switch to the lower-cost drugs whenever possible, helping generics claim slightly more than half of all the prescriptions written in 2005.
Generic drug makers in general are likely to benefit even more by all the attention generated by Wal-Mart. Just about seven of 10 people in the survey said they would prefer a generic drug to a branded medication, and would pay up to $25 for a 30-day supply.
Meanwhile, other retailers have been quick to try and ride the wave of public interest to higher drug sales. MyFloridaPharmacy.com, for example, rolled out its own discount generic drug campaign that cut Wal-Mart's price by 25 cents, down to $3.75 for a 30-day supply of some generics. BJ's Wholesale Club imitated Wal-Mart's move, along with other discounters.
"It will be interesting to see how much this leads to increased traffic and sales in these stores overall," said the pollsters.
The big drugstore chains will be paying particularly close attention. |
