Profitability of Drug Discount Program in Question
Two months into Wal-Mart Stores' generic drug program it is "unclear whether in all cases Wal-Mart is meeting its stated goal of making a profit" on the drugs, the New York Times reports. It also remains questionable "whether $4 drugs are indeed disrupting drug retailing and helping generate significant new consumer traffic -- or instead mainly giving a break to people who are already Wal-Mart customers and can spend their pharmacy savings" on other Wal-Mart products, according to the Times (Freudenheim, New York Times, 11/30).
The program, which is now available in 49 states, provides 30-day supplies of 160 generic medications for $4. The medications are available in more than 300 dosages (California Healthline, 11/27).
Wal-Mart has stated that it will make a profit on the discounted drugs.
Bill Simon, Wal-Mart's executive in charge of the program, said, "It can only be in our program if it is profitable. That's why we do not have the newer, more expensive conversions" such as the generic version of Zocor.
Ed Heckman, a pharmacy consultant, said that some generic drugs can be obtained for less than $4 by pharmacies, but he added that other costs, including store overhead and pharmacists' salaries, can add as much as $15 to the cost of providing a prescription. Another question is whether the discounts are attracting customers away from other pharmacies.
The Times reports that sales figures during the program's first seven weeks suggest that the discount is "not having a huge impact on overall sales of generic drugs in this country." Meanwhile, Wal-Mart earlier this week said that it had removed 55 drugs from the $4 list in nine states that prohibit pricing below cost. Those drugs will be priced at $9.
Wal-Mart spokesperson David Tovar said, "These states have low-cost laws, and we wanted to be in compliance" (New York Times, 11/30).