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Wal-Mart drug pitch praised, scorned

One competitor matches Wal-Mart's discounting of generic drugs, but some drug sellers dismiss it as a ploy.

By KRIS HUNDLEY
Published September 23, 2006

As Wal-Mart rolled out its flashy "$4 for generics" program in the Tampa Bay area Friday, one major competitor followed suit while other retailers, drug middlemen and customers tried to figure out how much they might win or lose by the giant retailer's highly publicized initiative.

And some savvy consumers even discovered they could still do better buying their generics on certain Internet sites.

At a Wal-Mart in Riverview, foot traffic was normal in the pharmacy area, but phone call volume was up. And numerous customers stopped by for a list of generic medications.

Shopper June Llanes said she was thrilled to find four of her prescriptions on Wal-Mart's low-cost generic list.

"Oh, my God, I was delighted," said the 80-year-old Tampa woman. "I get $660 a month and I take 12 prescriptions."

Brandon resident Shahara Grigoriev, 29, normally pays half the cost of her prescriptions. "Anything I can save to spend on something else is good," said the woman, who found the right drug for her migraine headaches on Wal-Mart's list, but in the wrong dosage.

Wal-Mart's move was matched by the nation's second-largest discounter, Target, which will meet Wal-Mart's prices on generics in the Tampa Bay area. But major drug retailers, including Walgreens and CVS, declined to follow suit, saying convenience and location will continue to bring customers into their stores. According to Citigroup's analyst Deborah Weinswig, the average co-pay on the generic drugs is $5.30. Raymond James & Associates' analyst John Ransom said insured patients make up the bulk of prescription customers at chain drugstores.

"And if their co-pay is just $5 or $10, is the savings at Wal-Mart enough to make them want to park at the back of the parking lot and thread their way through the store?" Ransom said.

Grocers that have jumped into the pharmacy business the past few years are also taking a wait-and-see attitude, according to spokespeople for both Publix and Sweetbay supermarkets.

"We're studying it very carefully," said Stephen Smith, vice president of merchandising for Sweetbay in Tampa.

Wal-Mart's plan, which will be rolled out statewide in January, was criticized by some for touting discounts on 291 generics, even though the list includes only about 124 separate medicines in various dosages. The popular antibiotic amoxicillin, for instance, is available from Wal-Mart in 12 different versions and counted as a dozen entries.

Wal-Mart spokesman David Tovar defended the retailer's accounting. "We have to carry all those different dosages because if the doctor wants you to take 500 milligrams of something, for instance, we can't just say 'Take two of the 250 milligram tablets,' " Tovar said. "We feel very comfortable the 291 number is accurate."

Perhaps more critically for Wal-Mart, a cursory review of a couple of Internet sites shows that, even at $4, some of Wal-Mart's generics are not the lowest price available.

Atenolol (25 mg), a blood pressure medication, is available for less than Wal-Mart's price on both Drugstore.com and Costco.com. So is Furosemide (40 mg), another blood pressure drug. Wal-Mart offers savings, meanwhile, on the diabetic medication Metformin (850 mg), Naproxen (500 mg) and Ranitidine (150 mg).

Drug industry experts said the biggest impact of Wal-Mart's move might be to heighten awareness of the price benefits of generics.

Heath Schiesser is vice president of marketing and sales for WellCare Health Plans Inc. in Tampa, which offers Medicare drug plans with no co-pay for generics until a total of $2,250 has been spent on drugs. Then, the member is responsible for full cost.

"One of the reasons we're excited about seeing retailers like Wal-Mart focus on generics is because it's one of the best ways for people to avoid hitting the coverage gap," Schiesser said.

Having the world's biggest retailer roll out $4 generics might also be a jolt to employers, and their employees, who are paying considerably more for such drugs to pharmacy benefit managers, or PBMs, like CareMark, Medco Health Solutions and Express Scripts.

Robert Garis, associate professor of pharmacy at Creighton University and a consultant to employer groups, said it is about time employers press these drug middlemen for better prices.

"Generics have been one of the last big cash cows for the PBMs," he said. "Employers, state governments and unions have been overpaying ridiculous amounts on generics."

Garis said he is not surprised by comments from PBMs like Medco, which dismissed Wal-Mart's move by saying its mail-order operations should see no downturn in sales.

"They are certainly playing like this will not have an impact," Garis said. "The resiliency of the PBM industry and their ability to spin things like they do boggles my mind."

Times staff writers Mark Albright, Andrew Meacham, Theresa Blackwell and Jeremy Hayes contributed to this report.

[Last modified September 23, 2006, 01:40:24]