Competition Deals with $4 Generics
When Wal-Mart announced its $4 generic prescription program, some moved quickly to match it (Target), others claimed to have a better option (Kmart’s 90-day program) and yet others (CVS) were comfortable enough with existing offerings to stand pat.
Wal-Mart said the plan is working as its pharmacy sales were up in November. That would mean others are seeing sales tail off, right? Not necessarily.
The top three drugstore chains all announced sales increases in November and independent pharmacy groups, such as the National Community Pharmacists Association, say members learned how to deal with large competitors long ago and this new wrinkle wasn’t anything they couldn’t handle.
A Dow Jones Newswire report said Wal-Mart’s increase might be a result
of attracting uninsured consumers that have gone without purchasing prescription
medicines in the past because of the cost.
Mary Sammons, Rite Aid chief executive, said, “Customers chose location, convenience and services over the small price differential on nearly all of the generics on the list. I continue to wonder how long these programs can last since the $4 cannot cover the full cost of dispensing, and you can only sell a product below cost for so long.”
Wal-Mart claims it is not selling the generics below cost. The company has maintained it has made deals with suppliers that enable it to offer the drugs at the $4 price point.
Discussion Questions: Will the $4 generics program
lead to lasting changes in the retail pharmacy business? What do you see as
being the next logical (illogical) step that Wal-Mart or other retailer will
go from the $4 plan?