$4 drugs boon to those not insured

But rivals scoff at Wal-Mart plan

Wal-Mart's new program offering $4 generic prescriptions might help North Carolina's 1.3 million uninsured residents slash medical expenses. But there's already debate about just how beneficial it will be for others.

The program, which lowers the price of 291 drugs, begins this weekend in Tampa, Fla. Wal-Mart will expand it to more states in 2007 but is not saying when North Carolina could see the cheaper prices.

The announcement this week caused a wave of reaction -- from investors dumping stock in competitors Walgreens and CVS to Target's announcement that it will match Wal-Mart's prices in the Tampa Bay area.

By Friday, many in the industry were downplaying the effect, with some calling it a public relations stunt. Wal-Mart has been working hard to remake its image in the face of criticism about its wages, benefits and other practices.

The 291 drugs include several that are listed multiple times, using different dosage amounts, according to critics of the program. They also pointed out that the drugs are mostly older ones that have been on the market longer and are already less expensive.

Indeed, according to industry publication Drug Store News, most people who have medical benefits might save only a few dollars or nothing at all, because most plans charge a generic drug co-pay of $5 or $10.

The group that will benefit most from the new program will be the uninsured. For them, the average out-of-pocket cost for a generic prescription drug last year was $29.82, according to the National Association of Chain Drug Stores.

A $4 price tag could represent substantial savings, especially in households taking several medications on the list.

Nationally, the uninsured spent $32 billion on health care last year, according to Drug Store News.

"Cash customers will be affected the most," said Diane Eliezer, marketing director for Raleigh-based Kerr Drug. "But for anyone with these [medical benefits] plans, it will be low effect. This is not going to be a case where someone's paying $80 and it goes down to $4."

Wal-Mart spokesman John Simley said many of the most commonly prescribed generic drugs are on the list. He said the list was compiled using the common dosages of the drugs selected, and he indicated that the company is not losing money selling any of the drugs for $4.

Though Target matched Wal-Mart's program immediately, it seems other competitors have no plans to do so.

Kerr Drug is waiting until the program comes to its markets in the Carolinas before deciding how to respond.

And Matt Leonard, CVS senior vice president of pharmacy, issued a statement Thursday saying in part, "These 300 drugs ... represent less than 10 percent of the more than 3,000 unique generic products that we stock. Cash sales of these products amount to less than one-half of 1 percent of our total pharmacy sales."

Whether to match Wal-Mart's $4 prices could be a tough call for companies, as the drug store industry has grown much more competitive in recent years.

Major players including Walgreens and CVS are expanding by acquisition and snapping up prime corner real estate for prominent stores.

And, as the pharmacy side of the business becomes less profitable, the retailers are putting more emphasis on their "front of the store" items such as soda and chips to make up profits.

Wal-Mart's new program is particularly worrisome for the nation's nearly 18,000 independent pharmacies.

"Matching them for a cash- paying customer is probably something we'll be forced to do," said Scott Townsend, who owns Wake Forest Drug on Capcom Avenue in Wake Forest with his wife, Debbie.

"I think what they're doing is in very poor taste. If we don't respond in kind, then we look like the bad guy, when in fact they're not doing anything that's truly a benefit."

Duke University economics professor Frank Sloan did see an upside to Wal-Mart's new program. If more people bypass their insurance and slap down four singles for these prescriptions, the money the insurance companies save could ripple through the industry, he said.

"The end result is that the expenses are lower and the premiums are lower," he said. "This is an opportunity to save some money."