Even though pharmacy giants like CVS and Walgreens have denied that Wal-Mart’s $4 drug plan has affected sales, Walgreens stock has slumped by 15 percent, and the chain has announced lower-than-expected third quarter earnings.
According to Peter Rost at Brandweek NRX, weaker margins on generic drugs were the reason for the slump. Peter also says that Wal-Mart has “just started wreaking havoc in the drug market. Target and others followed. Nothing will be the same. Watch as the old stalwarts try to keep prices high, until they finally bite the dust.”
Wal-Mart said Sept. 27 it would increase the number of generic medications covered by its plan to 361.
You know we at eDrugSearch.com are big, big fans of Wal-Mart and, specifically, the Wal-Mart drug plan. So we’re sorry we missed this little news tidbit earlier this month, via Peter Rost:
The Wal-Mart Stores Inc. worker fired … for intercepting a reporter’s phone calls says he was part of a larger, sophisticated surveillance operation that included snooping not only on employees, but also on critics, stockholders and the consulting firm McKinsey & Co.
Ugh. Read Peter’s full account here.
I’ve posted previously about Wal-Mart’s $4 drug plan, and how this has put considerable competitive pressure on smaller drug retailers. Apparently, Wal-Mart won’t get to try the same strategy in the banking business.
In July 2005, Wal-Mart filed an application with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to operate an industrial bank. Wal-Mart’s filing sent regional bank owners into a frenzy.
Why such a commotion? The owners feared it was only a matter of time before Wal-Mart used its economic might to crush local community banks, in the same way that it has demolished mom-and-pop operations across industry after industry.
Apparently the voice of 1,500 small bank and business owners was heard, and today Wal-Mart withdrew its application from the FDIC:
“Wal-Mart made a wise choice,” FDIC Chairman Sheila Bair said in a statement. “This decision will remove the controversy surrounding their intentions.”
Score one for the little guys.
In a previous post, Wal-Mart’s $4 generics: A great deal for Wal-Mart, I talked about how Wal-Mart’s $4 prescription plan is nothing more than clever marketing gimmick aimed at getting consumers in the door — although Wal-Mart executives aren’t willing to admit this.
Now Meijer Pharmacy, a competing chain of big-box superstores headquartered in Michigan, has one-upped the Wal-Mart plan, announcing it will give away antibiotics commonly prescribed to children. Meijer, however, is honest with its motives.
From All Spin Zone:
Meijer said the seven generic antibiotics, which are commonly prescribed to children for colds, ear infections, strep throat and other illnesses, would assist families dealing with health care and prescription drug costs, the Detroit Free Press reported Tuesday.
Fourteen-day supplies of the drugs  amoxicillin, cephalexin, SMZ-TMP, ciprofloxacin, penicillin-VK, ampicillin and erythromycin  will be given free of charge to any person with a prescription, regardless of insurance status, the retail chain said.
Meijer said about 500,000 of the medications, which generally cost between $8 and $30, are sold by the store every year. Meijer President Mark Murray said he expects the store to make back lost prescription revenues with the added traffic of new shoppers seeking to use the program.
The move follows announcements from Wal-Mart and Target retail chains that some generic drugs would be made available at their stores for $4.
Honesty — it’s so refreshing. Wal-Mart, you ought to try it once in a while.
Perhaps you remember this story when it was widely reported in January. As the Columbus Dispatch covered it then:
Plan B is two hormone pills (essentially high-test birth-control pills) that prevent pregnancy and are considered most effective when taken soon after unprotected sex  ideally, within 72 hours. Plan B is not the abortion pill, RU-486.
Tashina Byrd, her boyfriend and her 4-year-old son headed to a Springfield Wal-Mart to pick up some things, including Plan B. Byrd, 23, of Springfield, and her boyfriend, Brian O’Neill, 37, of Columbus, said a condom broke.
When the pharmacy attendant asked pharmacist Brent Beams about it, “He shook his head and laughed,” Byrd said. The attendant told them the store had Plan B but that nobody would give it to them, the couple said.
They asked for a store manager, who “came over and said, ‘The pharmacist has the law on his side,’ ” O’Neill said.
According to The Writing on the Wall Blog:
Byrd is now a rallying point for the National Abortion and Reproductive Rights Action League and the focus of a letter writing campaign targeted at Wal-Mart CEO Lee Scott. In an email solicitation Byrd writes:
You won’t believe what happened to me when I went with my boyfriend to Wal-Mart to buy Plan B  the “morning-after†pill  after our condom broke.
The pharmacist laughed in our faces and told us, “We have it on hand, but there’s no one here who can dispense it.â€Â
My name is Tashina Byrd, and this happened to me at my local Wal-Mart in Springfield, Ohio.
It can be embarrassing to share a private, personal experience like this, but I don’t want other women to be subjected to the humiliation and anger I felt when the pharmacist laughed at me.
That’s why I’m asking for your help today. I recently sent a letter to Wal-Mart CEO H. Lee Scott, Jr., urging him to change company policy to guarantee that pharmacies fill requests for Plan B without delay, just like they do for any other over-the-counter medicine. Click here to send your letter to Wal-Mart today.
You’ve already proven that together we can make Wal-Mart do what’s right for women. Last year, because of pressure from pro-choice activists like you, Wal-Mart reversed its discriminatory policy against stocking Plan B. Now, it’s time to ensure that they not only stock it but also sell it without delay or inconvenience.
In the end, I was lucky. I found another pharmacy that stocked Plan B and was willing to sell it to me. But what would happen to a woman who lives in a rural area  where Wal-Mart is often the only pharmacy  where the nearest drugstore could be 60 miles away or more? What if the second pharmacy refused, too?
Tashina’s experience points to one of the key reasons — besides lower costs — that more Americans are choosing to purchase prescription drugs online. Ordering medications over the Web is private and free from the unprofessional behavior of pharmacists like the one Tashina encountered.
Wal-Mart’s $4 generic drug plan has earned the mega-retailer a lot of good PR. But is the program all it claims to be?
Wal-Mart states that it provides “over 300 different generics available for $4 per prescription fill or refill (up to a 30-day supply).”
If you take a closer look at the drugs actually offered under the plan, technically Wal-Mart does offer 314 different drugs — but this includes different dosages of the same drug. If you don’t count different dosages, the plan only offers 143 drugs.
Sounds like another example of Wal-Mart’s infamous loss-leader gimmickry to us. Perhaps ElectroGeek sizes it up best:
The whole $4 generic drug plan appears to be nothing more than a fantastic marketing gimmick by marketing executives at Wal-Mart which was used in an effort to lure elderly customers back away from Walgreens. Wal-Mart appears to be deceiving the American public by not disclosing the full details of their $4 generic drug plan. Their only intention is apparently to get you in the door, up sell you to the regular prescription price and have you shop throughout the store.
Adds a commenter on ElectroGeek’s blog:
The deal is to get older seniors in the store, get the prescription, tell the customer to shop a while then come back. They delay the customer, them when the script is finally ready, many of the elderly simply pay the extra cause they are tired and do not want to be embarassed etc etc.
Some Wal-Mart competitors, such as Costco and Target, followed suit with their own $4 plans. But Costco has already discontinued its program, stating that “the cost of pharmacists at Costco, the bottle and maintaining records did not amount to $4, which is why the company ended up losing money with the plan.”
This would seem to indicate that Wal-Mart is making little, if any, money from the $4 generics — and a lot more from the people they draw into the store. The fact that Wal-Mart will not fill these prescriptions online or over the phone supports this argument.
A lot of attention has been given to Wal-Mart’s decision to cut the price of a small number of generic drugs. The move has inspired many commentators to suggest there is no longer a prescription drug crisis; as Right Voices summarizes this opinion:
Let the private sector take care of the problem … retailers will compete to get the customer in the door.
If only it were that simple. The reality is that Wal-Mart’s price cuts are more a PR move than a significant improvement for Americans without prescription drug coverage. As the Kaiser Family Foundation explains:
Consumer advocates and health care economists say that Wal-Mart’s program, and similar discount programs launched by other retailers including BJ’s Wholesale Club and Target, might benefit some people without prescription drug coverage, but it will not have a significant impact on the retail drug industry because it excludes brand-name drugs and many generics. According to IMS Health, only one of the 10 most prescribed medications — the antibiotic amoxicillin — is available through the Wal-Mart program.
Kaiser further reports:
The National Community Pharmacists Association, a trade group for independent drugstores, said that Wal-Mart’s list of discounted drugs is a “publicity stunt” designed to bolster store traffic.
Neither Wal-Mart nor any retailer has the purchasing power to force the pharmaceutical industry to lower its prices. The system can only be corrected by correcting the forces that corrupted the system — and those reside in the public sector.
Enabling Medicare to negotiate prices with drug companies would be a good start, but only a start. The Gregarious Blog offers some other interesting ideas.
Whatever the policy solution, one thing’s for sure: it’s not Wal-Mart.
