Long-term impact of $4 generics still unclear

October 23, 2006

If you want to understand the immediate impact of Wal-Mart's recent announcement that it will charge only $4 per prescription for nearly 300 generic drugs, just ask Nick Patel, R.Ph. Patel's West Coast Pharmacy, Tampa, Fla., is located one block from a Wal-Mart location and suddenly finds itself at the epicenter of a new healthcare debate. "I've had people come in with the list," Patel reported to Drug Topics. "But so far, I haven't lost any customers." Like many in the industry-especially those in the Tampa area-Patel is watching closely to see what happens next.

In late September, Wal-Mart began offering 30-day supplies of 291 generic drugs for only $4 at locations in the Tampa Bay, Fla., area. The company announced its intention to expand the program to the rest of Florida in January 2007 and nationwide later. More major retailers have followed suit, leading some experts to predict that a generic price war may be in the offing. Target announced it would offer the same price on the same drugs in its Tampa-area stores.

On-line, Smart Choice Drug Store also announced it would match Wal-Mart's prices. Memphis-based Fred's is rolling out a similar plan to offer 300 of the most popular generics at $4 in its Memphis-area locations. Kmart meanwhile is touting its plan for 90-day supplies of many of its generics for $15, which is available nationwide.

While critics of the healthcare system have long complained about the high price of name-brand medications, for perhaps the first time the focus is squarely on generics. "This will hurt many independents, but it will not hurt us at all," concluded Michael Hebert, R.Ph. of Pharmacy Consulting Services in Slidell, La. He operates two pharmacies that sell only generic medications and consults for other pharmacies making the switch. "We can be very competitive. There's no reason the public should have to pay so much for generics." (For more on this.)

Still, the vast majority of patients do not pay cash for their medications, meaning the price will undercut health insurance co-pays by at most a few dollars in most cases. In a pointed rejoinder from CVS, perhaps quashing the expectations of a price war, Matt Leonard, senior VP of pharmacy at the chain, issued a written statement that noted: "These 300 drugs are all older generics that already have lower reimbursement rates from health plans. They represent less than 10% of the more than 3,000 unique generic products that we stock. Cash sales of these products amount to less than one-half of one percent of our total pharmacy sales."